Stock Return Cross-Autocorrelations and Market Conditions in Japan

41 Pages Posted: 27 Jul 2003

See all articles by Allaudeen Hameed

Allaudeen Hameed

National University of Singapore (NUS) - Department of Finance

Yuanto Kusnadi

Singapore Management University - School of Accountancy

Date Written: June 2003

Abstract

In this paper, we show that changes in market conditions significantly affect cross-autocorrelations in short-horizon stock returns in Japan. We find strong (weak) cross-autocorrelations between returns on small firms and lagged returns on large firms following periods of aggregate market losses (gains). This asymmetric effect of lagged market state on cross-autocorrelations cannot be explained by market micro-structure biases such as non-synchronous trading and thin trading. Further analyses suggest that lack of aggregate trading activity following periods of market decline contribute to the delays in registering negative market-wide information in stock prices, particularly for small stocks.

Keywords: cross-autocorrelations, market conditions, return predictability, delay

JEL Classification: G14

Suggested Citation

Hameed, Allaudeen and Kusnadi, Yuanto, Stock Return Cross-Autocorrelations and Market Conditions in Japan (June 2003). Available at SSRN: https://ssrn.com/abstract=413680 or http://dx.doi.org/10.2139/ssrn.413680

Allaudeen Hameed (Contact Author)

National University of Singapore (NUS) - Department of Finance ( email )

Mochtar Riady Building
15 Kent Ridge Drive
Singapore, 119245
Singapore

HOME PAGE: http://bizfaculty.nus.edu.sg/faculty-details/?profId=1

Yuanto Kusnadi

Singapore Management University - School of Accountancy ( email )

60 Stamford Road
Singapore 178900
Singapore
+65 6808 5449 (Phone)

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