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Please use this identifier to cite or link to this item:
http://hdl.handle.net/2451/27030
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| Title: | Behavioralize This! International Evidence on Autocorrelation Patterns
of Stock Index and Futures Returns |
| Authors: | Ahn, Dong-Hyun
Boudoukh, Jacob
Richardson, Matthew
Whitelaw, Robert F. |
| Issue Date: | Jul-1999 |
| Series/Report no.: | FIN-99-040 |
| Abstract: | This paper investigates the relation between returns on stock indices
and their corresponding futures contracts in order 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 behavioral models. These implications are then tested using futures
data on 24 contracts across 15 countries. The major findings are (i)
return autocorrelations of indices tend to be positive even though their
corresponding futures contracts have autocorrelations close to zero,
(ii) these autocorrelation differences between spot and futures markets
are maintained even under conditions favorable for spot-futures
arbitrage, and (iii) these autocorrelation differences are most
prevalent during low volume periods. These results point us towards a
market microstructure-based explanation for short-horizon
autocorrelations and away from explanations based on current popular
behavioral models. |
| URI: | http://hdl.handle.net/2451/27030 |
| Appears in Collections: | Finance Working Papers
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