Cross-Autocorrelation in Asian Stock Markets

37 Pages Posted: 2 Jun 1998

See all articles by Grant Richard McQueen

Grant Richard McQueen

Brigham Young University - Department of Business Management

Eric C. Chang

University of Hong Kong - School of Business

J. Michael Pinegar

Brigham Young University - Marriott School of Management

Date Written: March 1998

Abstract

Five Asian stock markets (Hong Kong, Japan, South Korea, Taiwan, and Thailand) and the U.S. stock market are evaluated for evidence of cross-autocorrelation. We find evidence of Lo and MacKinlay's (1990a) cross-autocorrelation in each of the five Asian markets. Specifically, within each country, monthly returns on a portfolio of small stocks are correlated with the lagged returns on a portfolio of large stocks. We also find weak evidence of across-ocean and inter-Asian cross-autocorrelation; in several countries, monthly returns on portfolios of small Asian stocks are correlated with the lagged return on a portfolio of large U.S. stocks and large stocks in other Asian countries. We also confirm McQueen, Pinegar, and Thorley's (1996) finding of directional asymmetry in the U.S., with small stocks responding to lagged good, but not bad, news. However, the directional asymmetry is not universal and is significant only in the U.S. and Taiwan. Similarly, after correcting for small stock autocorrelation, large stocks retain their predictive power in some, but not all, of the markets. We also find that the degree of cross-autocorrelation has not weakened since the market correction of 1987. Our findings help shed light on existing explanations of the cross-autocorrelation puzzle and give direction for further research.

JEL Classification: G15, G14, F36

Suggested Citation

McQueen, Grant R. and Chang, Eric Chieh C. and Pinegar, J. Michael, Cross-Autocorrelation in Asian Stock Markets (March 1998). Available at SSRN: https://ssrn.com/abstract=93690 or http://dx.doi.org/10.2139/ssrn.93690

Grant R. McQueen (Contact Author)

Brigham Young University - Department of Business Management ( email )

TNRB 636
Provo, UT 84602
United States
801-422-3017 (Phone)

Eric Chieh C. Chang

University of Hong Kong - School of Business ( email )

Meng Wah Complex
Pokfulam Road
Hong Kong
China

J. Michael Pinegar

Brigham Young University - Marriott School of Management ( email )

Provo, UT 84602
United States
801-422-3088 (Phone)
801-422-0108 (Fax)

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