Autocorrelation of returns

The distribution of many asset returns is not only kurtotic and skewed. The return
distribution may also change over time and successive returns may not be independent
of one another. These phenomena will be reflected in the serial correlation or
autocorrelation of returns. Table 1.1 displays evidence that asset returns are not
typically independently and identically distributed. The rightmost column displays a
statistic which measures the likelihood that there is serial correlation between
returns on a given day and returns on the same asset during the prior five trading
days. High values of this statistic indicate a high likelihood that returns are
autocorrelated.
Table 1.1 Statistical properties of selected daily asset returns
Standard
Asset deviation Skewness Kurtosis Autocorrelation
Dollar–Swiss franc 0.0069 0.3472.485 6.0
Dollar–yen 0.0078 0.660 6.181 8.0
Dollar–Mexican peso 0.0132 ñ3.015 65.94756.7
Dollar–Thai baht 0.0080 ñ0.461 25.879 87.4
Crude oil 0.0204 0.249 4.681 41.1
Gold 0.0065 ñ0.165 4.983 21.3
Nikkei 225 average 0.0138 0.213 3.131 26.3
S&P 500 average 0.0087 ñ0.578 8.391 25.6