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On the Autocorrelation of the Stock Market*

X-CAPM: An Extrapolative Capital Asset Pricing Model

Ian Martin

Journal of Financial Econometrics, 2021, vol. 19, issue 1, 39-52

Abstract: I introduce an index of market return autocorrelation based on the prices of index options and of forward-start index options and implement it at a six-month horizon. The results suggest that the autocorrelation of the S&P 500 index was close to zero before the subprime crisis but was negative in its aftermath, attaining values around –20% to –30%. I speculate that this may reflect market perceptions about the likely reaction, via quantitative easing, of policymakers to future market moves.

Date: 2021
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Citations: View citations in EconPapers (2)

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Journal of Financial Econometrics is currently edited by Allan Timmermann and Fabio Trojani

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