Stock return cross-autocorrelations and market conditions in Japan

Publication Type

Journal Article

Publication Date

11-2006

Abstract

We show that changes in market conditions significantly affect cross-autocorrelations and speed of adjustment in weekly stock returns. We find significant positive cross-autocorrelations between weekly returns on a portfolio of small firms and lagged large-firm portfolio returns only when the lagged aggregate market has experienced a decline in value. These positive-return cross-autocorrelations are also associated with lower abnormal portfolio trading volume and greater delays in the adjustment of individual stock prices to ( negative) market-wide information, particularly for small firms. The effect of lagged market states cannot be explained by market microstructure biases such as nonsynchronous trading or thin trading.

Discipline

Accounting | Asian Studies | Corporate Finance

Research Areas

Corporate Governance, Auditing and Risk Management

Publication

Journal of Business

Volume

79

Issue

6

First Page

3029

Last Page

3056

ISSN

0021-9398

Identifier

10.1086/508007

Publisher

University of Chicago Press

Additional URL

https://doi.org/10.1086/508007

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