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New Trading Practices and Short-run Market Efficiency / Kenneth A. Froot, Andre F. Perold.
- Format:
- Book
- Author/Creator:
- Froot, Kenneth A.
- Series:
- Working Paper Series (National Bureau of Economic Research) no. w3498.
- NBER working paper series no. w3498
- Language:
- English
- Subjects (All):
- Rate of return.
- Physical Description:
- 1 online resource: illustrations (black and white);
- Place of Publication:
- Cambridge, Mass. National Bureau of Economic Research 1990.
- Cambridge, Massachusetts : National Bureau of Economic Research, 1990.
- Summary:
- We document a large decrease in autocorrelation and increase in variance of recent short-run returns on several broad stock market indexes, over the 1983-89 period, 15-minute returns went from being highly positively serially correlated to practically uncorrelated. Over the past twenty years, daily and weekly autocorrelations have also fallen, we use transactions data to decompose short-run index autocorrelation into three components: bid-ask bounce, nontrading effects, and noncomtemporaneous cross-stock correlations in specialists' quotes. The first two factors do not explain the autocorrelation's decline. We argue that new trading practices have improved the processing of market-wide information, and that the recent decreases in autocorrelation and increases in volatility simply reflect these improvements.
- Notes:
- Print version record
- October 1990.
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