CFA Practice Question

There are 275 practice questions for this study session.

CFA Practice Question

An autocorrelation test measures the significance of positive or negative correlation in returns over time. Serial correlation refers to the tendency for stock returns to be related to past returns. Positive serial correlation means that positive returns tend to follow positive returns. Researchers found that the correlations were typically not statistically significant in the securities market. This indicates that the ______ is not really a pricing anomaly.
A. value effect
B. auto effect
C. overreaction effect
Explanation: Security returns over time should be independent of one another.

User Contributed Comments 3

User Comment
Shaan23 My logic was over reaction affect has to do with historical information(past price changes) -- That has to do with correlation and answer.
khalifa92 the textbook says " One criticism is that the observed anomaly may be the result of statistical problems in the analysis."
Danielm96 Could anyone explain me this?
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