Estimating the Variances of Autocorrelations Calculated from Financial Time Series

Stephen J. Taylor

Journal of the Royal Statistical Society Series C, 1984, vol. 33, issue 3, 300-308

Abstract: Autocorrelation coefficients calculated from n observations are known to have variances approximately equal to 1/n, for a series of independent and identically distributed variables. The variances can be higher for a general uncorrelated process. Estimates of the variances are derived, assuming only that the process is uncorrelated with symmetric distributions. Results are presented for 17 financial time series. Most estimates exceed 2.5/n for daily returns from commodities, 1.6/n for currencies and 1.3/n for a share index. Standard tests for zero autocorrelation are therefore unreliable. Suitably rescaled data have autocorrelation variances close to 1/n.

Date: 1984
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