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Proceedings Paper

Volatility and serial correlation: revisiting the LeBaron effect
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Paper Abstract

According to the LeBaron effect, serial correlation is low when volatility is high and vice-versa. We show that it is true only for the predictable part of the volatility, while volatility which cannot be forecasted is positively linked to serial correlation. Since the mechanism of price formation can be very different in small and large markets we investigate the effect of volatility on intraday serial correlation in Italy (a small market) and U.S. (a large market). We find substantial differences in the impact of volatility in the two markets.

Paper Details

Date Published: 15 June 2007
PDF: 8 pages
Proc. SPIE 6601, Noise and Stochastics in Complex Systems and Finance, 66010Y (15 June 2007); doi: 10.1117/12.724714
Show Author Affiliations
Simone Bianco, Univ. of North Texas (United States)
Roberto Renò, Univ. di Siena (Italy)

Published in SPIE Proceedings Vol. 6601:
Noise and Stochastics in Complex Systems and Finance
János Kertész; Stefan Bornholdt; Rosario N. Mantegna, Editor(s)

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