Stock return autocorrelation contains spurious components—the nonsynchronous trading effect (NT) and bid–ask bounce (BAB)—and genuine components—partial price adjustment (PPA) and time-varying risk premia (TVRP). We identify a portion that can unambiguously be attributed to PPA, using...

We find compelling evidence that stock return autocorrelation is not spurious. Specifically, we find that partial price adjustment is an important source, and in some cases the main source, of the autocorrelation. In contrast to previous tests, our tests of partial price adjustment are direct,...