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Some Effects of Errors on the Independence and Distribution of Stock Price Returns

Author

Listed:
  • P. D. Praetz

    (Monash University. Helpful comments from R.R. Officer are gratefully acknowledged.)

Abstract

There are many stages at which errors in recorded stock prices can appear. Some simple keypunching errors, for example, can cause substantial errors. This note demonstrates some effects of these errors on serial correlations and on the distributions of returns. One explanation is provided for observed negative first-order serial correlation and for observed “fat tails†in return distributions. Some of the effects are well-known but have not previously been documented.

Suggested Citation

  • P. D. Praetz, 1976. "Some Effects of Errors on the Independence and Distribution of Stock Price Returns," Australian Journal of Management, Australian School of Business, vol. 1(2), pages 79-83, October.
    • Handle: RePEc:sae:ausman:v:1:y:1976:i:2:p:79-83
    DOI: 10.1177/031289627600100205
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    References listed on IDEAS

    as
    1. Conrad, Klaus & Juttner, D Johannes, 1973. "Recent Behaviour of Stock Market Prices in Germany and the Random Walk Hypothesis," Kyklos, Wiley Blackwell, vol. 26(3), pages 576-599.
    2. Officer, R. R., 1975. "Seasonality in Australian capital markets : Market efficiency and empirical issues," Journal of Financial Economics, Elsevier, vol. 2(1), pages 29-51, March.
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