I was playing with some data on deviation of close prices from its smoothed estimated and got these ACF and partial ACFs: ACF and partial ACF

I still struggle to get proper intuition to the ACF plots. What do the plots tell me? That I need more than 100 steps in time for the AR model?

  • $\begingroup$ What you are seeing here is that the price level is highly autocorrelated, the price on day T+1 is not much different from the price on day T. To avoid this problem, most quants work with daily changes in price (or daily returns), which are approximately uncorrelated. $\endgroup$ – noob2 May 7 at 19:50

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