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The determinants of quantile autocorrelations: Evidence from the UK

Lookup NU author(s): Professor Bartosz GebkaORCiD

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Abstract

We empirically analyse the cross-sectional determinants of stock return autocorrelations in the UK in different quantiles of conditional return distributions. Autocorrelations in low quantiles are predominantly positive, whereas those in the remaining quantiles are negative. Autocorrelations in different quantiles depend on different sets of firms’ and trading characteristics: when returns are normal or high, prices react quickly to information, are driven by positive feedback traders, instantaneous news arrivals, and overshoot, trades are predominantly motivated by hedging/liquidity needs, and measured autocorrelations can be biased by the bid-ask bounce effect and nonsynchronous trading. However, when returns are unusually low, prices are driven by information arriving sequentially and react sluggishly to it, and are influenced by trading on private information and/or negative feedback traders.

Publication metadata

Author(s): Gebka B, Wohar M

Publication type: Article

Publication status: Published

Journal: International Review of Financial Analysis

Year: 2013

Volume: 29

Pages: 51-61

Print publication date: 01/04/2013

ISSN (print): 1057-5219

ISSN (electronic): 1873-8079

Publisher: Elsevier

URL: http://dx.doi.org/10.1016/j.irfa.2013.03.010

DOI: 10.1016/j.irfa.2013.03.010

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