Temporary Components of Stock Prices: A Skeptic's View
- 1 April 1993
- journal article
- research article
- Published by Taylor & Francis in Journal of Business & Economic Statistics
- Vol. 11 (2) , 199-207
- https://doi.org/10.1080/07350015.1993.10509948
Abstract
Recent empirical work has uncovered U-shaped patterns of large magnitude in the serial-correlation estimates of multiyear stock returns. The current literature in finance has taken this evidence to mean that there exists a temporary component of stock prices. This article provides an alternative explanation regarding these findings. Specifically, we show that the patterns in serial-correlation estimates and their magnitude observed in previous studies should be expected under the null hypothesis of serial independence.Keywords
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