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THE CROSS‐AUTOCORRELATION OF SIZE‐BASED PORTFOLIO RETURNS IS NOT AN ARTIFACT OF PORTFOLIO AUTOCORRELATION
Author(s) -
Richardson Terry,
Peterson David R.
Publication year - 1999
Publication title -
journal of financial research
Language(s) - English
Resource type - Journals
SCImago Journal Rank - 0.319
H-Index - 49
eISSN - 1475-6803
pISSN - 0270-2592
DOI - 10.1111/j.1475-6803.1999.tb00711.x
Subject(s) - autocorrelation , econometrics , portfolio , economics , stock (firearms) , financial economics , stock exchange , statistics , mathematics , finance , geography , archaeology
Prior studies find evidence of asymmetric size‐based portfolio return cross‐autocorrelations where lagged large firm returns lead current small firm returns. However, some studies question whether this economic relation is independent of the effect of portfolio return autocorrelation. We formally test for this independence using size‐based portfolios of New York Stock Exchange and American Stock Exchange securities and, separately, portfolios of Nasdaq securities. Results from causality regressions indicate that, across all markets, lagged large firm returns predict current small firm returns, even after controlling for autocorrelation in small firm returns. These cross‐autocorrelation patterns are stronger for Nasdaq securities.