Chelley-Steeley, P and Steeley, JM ORCID: (2014) Porfolio size, non-trading frequency and portfolio return autocorrelation. Journal of International Financial Markets, Institutions and Money, 33. 56 - 77.

J Steeley - Portfolio size, non-trading frequency and portfolio return autocorrelation.pdf - Accepted Version
Available under License Creative Commons Attribution Non-commercial No Derivatives.

Download (1MB) | Preview


In this paper we re-examine the relationship between non-trading frequency and portfolio return autocorrelation. We show that in portfolios where security specific effects have not been completely diversified, portfolio autocorrelation will not increase monotonically with increasing non-trading, as indicated in Lo and MacKinlay (1990). We show that at high levels of non-trading, portfolio autocorrelation will become a decreasing function of non-trading probability and may take negative values. We find that heterogeneity among the means, variances and betas of the component securities in a portfolio can act to increase the induced autocorrelation, particularly in portfolios containing fewer stocks. Security specific effects remain even when the number of securities in the portfolio is far in excess of that considered necessary to diversify security risk.

Item Type: Article
Uncontrolled Keywords: Portfolio return autocorrelation; Non-trading; Diversification
Subjects: H Social Sciences > HB Economic Theory
Divisions: Faculty of Humanities and Social Sciences > Keele Management School
Depositing User: Symplectic
Date Deposited: 14 Jun 2017 15:32
Last Modified: 20 May 2019 08:34

Actions (login required)

View Item View Item