Partial Adjustment or Stale Prices? Implications from Stock Index and Futures Return Autocorrelations

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Excess Comovement of Stock Returns: Evidence from Cross-Sectional Variation in Nikkei 225 Weights (2008, background): “The bias is wellknown and documented by Fisher (1966), Scholes and Williams (1977), Lo and MacKinlay (1990), and Ahn et al. (2002). In my sample, the returns of overweighted securities are negatively correlated with lagged index returns.”
Momentum and Reversals in Equity‐Index Returns During Periods of Abnormal Turnover and Return Dispersion (2003, result): “The futures results seem particularly important given the results of Ahn et al. (2002), who ¢nd that futures index returns typically have an autocorrelation near zero rather than the positive autocorrelation observed in the underlying spot index returns.”
Time Series Momentum (2012, methodology): “Using a vector auto-regression (VAR), we confirm that speculators trade in the same direction as a return shock and reduce their positions as the shock dissipates, whereas hedgers take the opposite side of these trades.”
Premiums-Discounts and Exchange Traded Funds (2006, background): “Ahn et al. [2002] compare microstructurebased explanations (i.e., stale prices) to partial adjustmentbased explanation for portfolio autocorrelations. They conclude that their findings can “most easily be associated” with market microstructure-based explanations. The source of much of the microstruc”