Evidence on the speed of convergence to market efficiency

Evidence on the speed of convergence to market efficiency Daily returns for stocks listed on the New York Exchange (NYSE) are not serially correlated while order imbalances on the same stocks are highly persistent. These empirical facts can be reconciled if sophisticated investors react to order imbalances within the trading day by undertaking enough countervailing trades to remove serial dependence over a daily horizon. How long does this actually take? The pattern of intra-day serial dependence reveals that it takes more than five minutes but less than sixty minutes. http://www.deepdyve.com/assets/images/DeepDyve-Logo-lg.png Journal of Financial Economics Elsevier

Evidence on the speed of convergence to market efficiency

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Publisher
Elsevier
Copyright
Copyright © 2005 Elsevier B.V.
ISSN
0304-405x
D.O.I.
10.1016/j.jfineco.2004.06.004
Publisher site
See Article on Publisher Site

Abstract

Daily returns for stocks listed on the New York Exchange (NYSE) are not serially correlated while order imbalances on the same stocks are highly persistent. These empirical facts can be reconciled if sophisticated investors react to order imbalances within the trading day by undertaking enough countervailing trades to remove serial dependence over a daily horizon. How long does this actually take? The pattern of intra-day serial dependence reveals that it takes more than five minutes but less than sixty minutes.

Journal

Journal of Financial EconomicsElsevier

Published: May 1, 2005

References

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