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- Title
FILTER RULE TESTS OF THE ECONOMIC SIGNIFICANCE OF SERIAL DEPENDENCIES IN DAILY STOCK RETURNS.
- Authors
Corrado, Charles J.; Suk-Hun Lee
- Abstract
In this paper we examine the ability of filter rules to predict variation in expected daily returns for a sample of 120 Dow Jones and S&P 100 stocks from 1963 through 1989. Equally weighted portfolios of filter-rule-traded stocks consistently outperform a buy-and-hold portfolio of the same stocks before accounting for transaction costs. The difference in returns between filter rule and buy-and-hold portfolios is eliminated by one-way transaction costs of 12 basis points. The economic significance of daily stock return autocorrelations is estimated. A marginal I percent increase in a first-order autocorrelation increases filter rule returns by an estimated 3.84 percent.
- Subjects
ACCOUNTING; STOCKS (Finance); TRANSACTION costs; STATISTICAL correlation
- Publication
Journal of Financial Research, 1992, Vol 15, Issue 4, p369
- ISSN
0270-2592
- Publication type
Article
- DOI
10.1111/j.1475-6803.1992.tb00119.x