Research indicates that the correlation coefficient between successive days' share price changes is:
A) quite close to +1.
B) quite close to zero.
C) quite close to -1.
D) directly related to the share's beta.

Question

Quizplus · Accepted Answer

Research indicates that successive days' share price changes are largely random and therefore the correlation coefficient between them is quite close to zero. This means that the movements in share prices from one day to the next are not influenced by the movements on the previous days. Choice D is incorrect as there is no direct relationship between correlation coefficient and a share's beta.

Research Indicates That the Correlation Coefficient Between Successive Days' Share