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An Investigation of Conditional Autocorrelation and Cross-Autocorrelation in Emerging Markets

Author

Listed:
  • Robert W. Faff

    (Department of Accounting and Finance, Building 11E, Monash University Victoria 3800, Australia)

  • David Hillier

    (Leeds University Business School, Maurice Keyworth Building, The University of Leeds, Leeds LS2 9JT, UK)

  • Michael D. McKenzie

    (School of Economics and Finance, RMIT University, GPO Box 2476V, Melbourne Victoria 3000, Australia)

Abstract

We extend the feedback trader model by including a cross-market feedback trader. Our analysis of eighteen emerging markets suggests that there exists both positive and negative feedback traders in the markets and their activity is related to stock index return volatility. For cross-market feedback traders however, we show that, although cross-market autocorrelation among emerging markets is high and variable, the hypothesized negative relationship between cross-market autocorrelation and volatility is much weaker than its domestic counterpart.

Suggested Citation

  • Robert W. Faff & David Hillier & Michael D. McKenzie, 2005. "An Investigation of Conditional Autocorrelation and Cross-Autocorrelation in Emerging Markets," Review of Pacific Basin Financial Markets and Policies (RPBFMP), World Scientific Publishing Co. Pte. Ltd., vol. 8(03), pages 467-499.
    • Handle: RePEc:wsi:rpbfmp:v:08:y:2005:i:03:n:s0219091505000440
    DOI: 10.1142/S0219091505000440
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    Citations

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    Cited by:

    1. Bartosz Gębka & Dobromił Serwa, 2012. "Liquidity needs, private information, feedback trading: verifying motives to trade," NBP Working Papers 119, Narodowy Bank Polski.
    2. Yu-Hong Liu & I-Ming Jiang & Shih-Cheng Lee & Yu-Ting Chen, 2011. "The Valuation Of Reset Options When Underlying Assets Are Autocorrelated," The International Journal of Business and Finance Research, The Institute for Business and Finance Research, vol. 5(2), pages 95-114.
    3. Gębka, Bartosz & Serwa, Dobromił, 2015. "The elusive nature of motives to trade: Evidence from international stock markets," International Review of Financial Analysis, Elsevier, vol. 39(C), pages 147-157.
    4. Chau, Frankie & Kuo, Jing-Ming & Shi, Yukun, 2015. "Arbitrage opportunities and feedback trading in emissions and energy markets," Journal of International Financial Markets, Institutions and Money, Elsevier, vol. 36(C), pages 130-147.

    More about this item

    Keywords

    Migration hypothesis; informed traders; conditional return autocorrelation; feedback trading;
    All these keywords.

    JEL classification:

    • G1 - Financial Economics - - General Financial Markets
    • G2 - Financial Economics - - Financial Institutions and Services
    • G3 - Financial Economics - - Corporate Finance and Governance

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