Can We Make Money with Fifth-order Autocorrelation in Japanese Stock Prices?
We first report that one-minute returns on TOPIX have exhibited significant autocorrelation at five-minute intervals since 1997/98, which implies there is an arbitrage opportunity. Special quotes that are issued whenever there is a price jump in excess of a predetermined band seem to be the source of this autocorrelation, since these have been updated at five-minute intervals since August 1998. Individual stock returns also exhibit fifth-order autocorrelation, but this disappears when the data with special quotes are excluded from the sample. The arbitrage opportunities, however, turn out to be spurious since trading is suspended whenever a special quote is issued.
Year of publication: |
2005-07
|
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Authors: | Tsutsui, Yoshiro ; Hirayama, Kenjiro ; Tanaka, Takahiro ; Uesugi, Nobutaka |
Institutions: | Institute of Social and Economic Research (ISER), Osaka University |
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