Temporary Components of Stock Prices: A Skeptic's View

Matthew Richardson

Journal of Business & Economic Statistics, 1993, vol. 11, issue 2, 199-207

Abstract: Recent empirical work has uncovered.U-shaped patterns of large magnitude in the serial-correlation estimates of multiyear stock returns. The current literature in finance has taken this evidence to mean that there exists a temporary component of sto ck prices. This article provides an alternative explanation regarding these findings. Specifically, the author shows that the patterns in serial-correlation estimates and their magnitude observed in previou s studies should be expected under the null hypothesis of serial independence.

Date: 1993
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