Question

When stock returns exhibit positive serial correlation, this means that __________ returns tend to follow ___________ returns.A. positive; positiveB. positive; negativeC. negative; positiveD. positive; zero

Answer 1

A. positive; positive

Step-by-step explanation:

• This is also called the autocorrelation, where the error terms in a series are transferred from one period to another The positive serial autocorrelation is an error that carries a positive error forwards, while a negative correlation s an error that carrier the negative error forwards.

• Testing an autocorrelation can be done through the plotting of residuals on a graph, with one side along the zero lines. The serial correlation can be in the linear form and can be shown by the regression coefficient standard error.

• Most of them are used for quantitative analysis.