Dynamics of Intraday Serial Correlation in China's Stock Market

Abstract

In this article, we implement the Variance Ratio test to study on the intraday serial correlation of Shenzhen component index return series. The empirical research indicates significant positive serial correlation in China's stock market. For a better understanding of the dynamics of intraday serial correlation in China's stock market, we first investigate the presence of autocorrelation mode of serial correlation. Then, we construct the VR-HAR-RV and VR-HAR-RV-CJ models to explore the links between serial correlation and volatility. We find both the VR-HAR-RV and VR-HAR-RV-CJ models can partially explain the links between serial correlation and volatility, but the VR-HAR-RV-CJ model is more powerful than the VR-HAR-RV model.

Keywords:

• Intraday serial correlation
• Jump
• Realized variance
• Variance ratio test

Mathematics Subject Classification:

• 62G10
• 62J05
• 62M10

Acknowledgment

Bi's research was partially supported by the Research Funds for Graduate Students of Renmin University of China (11XNH105). Zhang's research was partially supported by the Fundamental Research Funds for the Central Universities, the Research Funds of Renmin University of China (10XNL007). Xu's research was partially supported by the NSFC (71071155).