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A Nonparametric Distribution-Free Test for Serial Independence in Stock Returns: A Comment

Published online by Cambridge University Press:  06 April 2009

Richard Ashley  and
Douglas Patterson
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Extract

We have confirmed that Corrado and Schatzberg's (1990) criticism of our test for serial independence in stock returns (Ashley and Patterson (1986)) is correct. The corrected results still favor rejection of the null hypothesis that the daily returns for several stocks (notably Holly Sugar (HLY) and E Systems (ESY)) are serially independent, but only at the 12-percent and 14-percent significance levels, respectively. Evidently, this kind of test is long on simplicity and intuitive appeal, but short on power.

Type
Research Article
Information
Journal of Financial and Quantitative Analysis , Volume 25 , Issue 3 , September 1990 , pp. 417 - 418
Copyright
Copyright © School of Business Administration, University of Washington 1990

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References

Ashley, R.; Patterson, D.; and Hinich, M. “A Diagnostic Test For Nonlinear Serial Dependence in Time Series Fitting Errors.” Journal of Time Series Analysis, 7 (1986), 165–178.CrossRefGoogle Scholar
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Corrado, C. J., and Schatzberg, J. “A Nonparametric, Distribution-Free Test for Serial Independence in Stock Returns: A Correction.” Journal of Financial and Quantitative Analysis, 25 (09 1990), 411–415.CrossRefGoogle Scholar
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