0
$\begingroup$

I am currently struggling with the interpretation of a price chart and the corresponding ACF graph. The question is, if there is momentum in the price of this asset. This is the corresponding price chart for a period of 19 years (5000 business days):

enter image description here It doesn't´t seem to have much of momentum when looking at the price development. After verifying that the time series is (trend)-stationary by means of the Zivot / Andrews Test (ur.za in R), i generated the ACF plot to get a further idea of potential Momentum. And there´s the problem. The ACF graph indicates a price continuation pattern of around 700-800 lags (business days as the data has business days as frequency) or 2.5 - 3 years of momentum. But this is in strong contrast to the price chart above and to the efficient market hypothesis. Is there any rationale mistake from my side?

enter image description here

$\endgroup$

migrated from stats.stackexchange.com Nov 10 '18 at 12:33

This question came from our site for people interested in statistics, machine learning, data analysis, data mining, and data visualization.

  • $\begingroup$ The prices are usually correlated, the returns may not. That's why it's almost pointless to look at ACF of price series. Pull up efficient market hypothesis and convince yourself that it has nothing to do with the price chart of yours $\endgroup$ – Aksakal Nov 9 '18 at 19:12
  • $\begingroup$ Despite what the test says: price series are not stationary, use returns. $\endgroup$ – Bob Jansen Nov 10 '18 at 23:10

Your Answer

By clicking “Post Your Answer”, you agree to our terms of service, privacy policy and cookie policy