Short-Term Autocorrelation in Australian Equities

Clive Gaunt and Philip Gray
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Clive Gaunt: UQ Business School, The University of Queensland, St Lucia QLD 4072.
Philip Gray: UQ Business School, The University of Queensland, St Lucia QLD 4072.

Australian Journal of Management, 2003, vol. 28, issue 1, 97-117

Abstract: This paper examines the statistical and economic significance of short-term autocorrelation in Australian equities. We document large negative first-order autocorrelation in individual stock returns. Preliminary results suggest this autocorrelation is economically significant, as two simple trading strategies based on the autocorrelation structure appear to yield large risk-adjusted returns. Further analysis, however, shows that these results are driven by the inclusion of smallcapitalisation and low-priced stocks which are vulnerable to a number of market-microstructure-related problems. After revising the dataset to mitigate these problems, little evidence of economic significance remains.

Keywords: AUTOCORRELATION; ECONOMIC SIGNIFICANCE; RANDOM WALK HYPOTHESIS; MARKET EFFICIENCY (search for similar items in EconPapers)
Date: 2003
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Citations: View citations in EconPapers (17)

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Persistent link: https://EconPapers.repec.org/RePEc:sae:ausman:v:28:y:2003:i:1:p:97-117

DOI: 10.1177/031289620302800105

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