Partial Adjustment or Stale Prices? Implications from Stock Index and Futures Return Autocorrelations

Dong-Hyun Ahn, Jacob Boudoukh, Matthew Richardson and Robert F. Whitelaw
Additional contact information
Dong-Hyun Ahn: University of North Carolina, Chapel Hill
Jacob Boudoukh: New York University, IDC, and NBER
Matthew Richardson: New York University and NBER
Robert F. Whitelaw: New York University and NBER

The Review of Financial Studies, 2002, vol. 15, issue 2, 655-689

Abstract: We investigate the relation between returns on stock indices and their corresponding futures contracts to evaluate potential explanations for the pervasive yet anomalous evidence of positive, short-horizon portfolio autocorrelations. Using a simple theoretical framework, we generate empirical implications for both microstructure and partial adjustment models. The major findings are (i) return autocorrelations of indices are generally positive even though futures contracts have autocorrelations close to zero, and (ii) these autocorrelation differences are maintained under conditions favorable for spot-futures arbitrage and are most prevalent during low-volume periods. These results point toward microstructure-based explanations and away from explanations based on behavioral models. Copyright 2002, Oxford University Press.

Date: 2002
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (55)

There are no downloads for this item, see the EconPapers FAQ for hints about obtaining it.

Related works:
This item may be available elsewhere in EconPapers: Search for items with the same title.

Export reference: BibTeX RIS (EndNote, ProCite, RefMan) HTML/Text

Persistent link: https://EconPapers.repec.org/RePEc:oup:rfinst:v:15:y:2002:i:2:p:655-689

Ordering information: This journal article can be ordered from
https://academic.oup.com/journals

Access Statistics for this article

The Review of Financial Studies is currently edited by Itay Goldstein

More articles in The Review of Financial Studies from Society for Financial Studies Oxford University Press, Journals Department, 2001 Evans Road, Cary, NC 27513 USA.. Contact information at EDIRC.
Bibliographic data for series maintained by Oxford University Press ().