Cross-Autocorrelation between Small and Large Cap Portfolios in the German and Turkish Stock Markets

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Cross-Autocorrelation between Small and Large Cap Portfolios in the German and Turkish Stock Markets

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Erdinc Altay (University of Istanbul, Faculty of Economics)

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Erdinc Altay

Abstract

This paper studies the cross-autocorrelation structure in the German and Turkish stock markets by using daily portfolio returns. We find the evidence that large cap portfolios lead small cap portfolios in both subperiods of German stock market but this structure is seen only in the first subperiod of Turkish stock market. Analysing the market-wide and portfolio-specific information effects on portfolio returns shows that above stated lead-lag relation is associated with the market-wide information content in lagged large cap portfolio returns. We also document a directional asymmetry in small (large) cap portfolio returns’ reactions to lagged large (small) cap portfolio returns. The evidence is contradicting to the previous findings of McQueen, Pinegar and Thorley (1996) and Marshall and Walker (2002) whoose researches are conducted on US and Chile stock markets. Our findings show the lagged effects of bad news - not good news - on small cap portfolio returns. It is documented that the speed of adjustment of small cap portfolio prices to common market-wide information is slower than large cap portfolio prices and small cap portfolio prices are slower in reacting to bad news.

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Paper provided by EconWPA in its series Finance with number 0308005.

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Length: 28 pages
Date of creation: 15 Aug 2003
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Handle: RePEc:wpa:wuwpfi:0308005

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Find related papers by JEL classification:
G12 - Financial Economics - - General Financial Markets - - - Asset Pricing
G14 - Financial Economics - - General Financial Markets - - - Information and Market Efficiency; Event Studies
G15 - Financial Economics - - General Financial Markets - - - International Financial Markets

This paper has been announced in the following NEP Reports:

NEP-ALL-2003-08-17 (All new papers)
NEP-CFN-2003-08-17 (Corporate Finance)
NEP-ETS-2003-08-17 (Econometric Time Series)
NEP-FMK-2003-08-17 (Financial Markets)

References listed on IDEAS
Please report citation or reference errors to , or , if you are the registered author of the cited work, log in to your RePEc Author Service profile, click on "citations" and make appropriate adjustments.:

Chui, Andy C W & Kwok, Chuck C Y, 1998. "Cross-Autocorrelation between A Shares and B Shares in the Chinese Stock Market," Journal of Financial Research, Southern Finance Association and Southwestern Finance Association, vol. 21(3), pages 333-53, Fall.

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Cited by:
(explanations, Please report citation or reference errors to , or , if you are the registered author of the cited work, log in to your RePEc Author Service profile, click on "citations" and make appropriate adjustments.)

Daxue Wang, 2006. "Cross-Autocorrelation of Dual-Listed Stock Portfolio Returns: Evidence from the Chinese Stock Market," Computing in Economics and Finance 2006 182, Society for Computational Economics. [Downloadable!]

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