Volatility and serial correlation: revisiting the LeBaron effect

Simone Bianco; Roberto Renò

doi:10.1117/12.724714

15 June 2007 Volatility and serial correlation: revisiting the LeBaron effect

Simone Bianco, Roberto Renò

Proceedings Volume 6601, Noise and Stochastics in Complex Systems and Finance; 66010Y (2007) https://doi.org/10.1117/12.724714
Event: SPIE Fourth International Symposium on Fluctuations and Noise, 2007, Florence, Italy

Abstract

According to the LeBaron effect, serial correlation is low when volatility is high and vice-versa. We show that it is true only for the predictable part of the volatility, while volatility which cannot be forecasted is positively linked to serial correlation. Since the mechanism of price formation can be very different in small and large markets we investigate the effect of volatility on intraday serial correlation in Italy (a small market) and U.S. (a large market). We find substantial differences in the impact of volatility in the two markets.

Citation Download Citation

Simone Bianco and Roberto Renò "Volatility and serial correlation: revisiting the LeBaron effect", Proc. SPIE 6601, Noise and Stochastics in Complex Systems and Finance, 66010Y (15 June 2007); https://doi.org/10.1117/12.724714

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