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Can We Make Money with Fifth-order Autocorrelation in Japanese Stock Prices?

Author

Listed:
  • Yoshiro Tsutsui
  • Kenjiro Hirayama
  • Takahiro TanakaAuthor-Name:
  • Nobutaka Uesugi

Abstract

We first report that one-minute returns on TOPIX have exhibited significant autocorrelation at five-minute intervals since 1997/98, which implies there is an arbitrage opportunity. Special quotes that are issued whenever there is a price jump in excess of a predetermined band seem to be the source of this autocorrelation, since these have been updated at five-minute intervals since August 1998. Individual stock returns also exhibit fifth-order autocorrelation, but this disappears when the data with special quotes are excluded from the sample. The arbitrage opportunities, however, turn out to be spurious since trading is suspended whenever a special quote is issued.

Suggested Citation

  • Yoshiro Tsutsui & Kenjiro Hirayama & Takahiro TanakaAuthor-Name: & Nobutaka Uesugi, 2005. "Can We Make Money with Fifth-order Autocorrelation in Japanese Stock Prices?," ISER Discussion Paper 0639, Institute of Social and Economic Research, Osaka University.
    • Handle: RePEc:dpr:wpaper:0639
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    File URL: https://www.iser.osaka-u.ac.jp/library/dp/2005/DP0639.pdf
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    Cited by:

    1. Shternshis, Andrey & Mazzarisi, Piero & Marmi, Stefano, 2022. "Measuring market efficiency: The Shannon entropy of high-frequency financial time series," Chaos, Solitons & Fractals, Elsevier, vol. 162(C).

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