Serial correlation
A)tends to prove that markets are totally inefficient.
B)supports weak form efficiency.
C)coefficients tend to range between 0.75 and 1.
D)is best used to identify insider trading.
E)best indicates that markets are semi-strong form efficient.

Question

Quizplus · Accepted Answer

Serial correlation is the extent to which the current value of a variable is correlated with past values of the same variable. In finance, it is used to test the efficiency of financial markets. If there is serial correlation in stock prices, it means that past stock prices can be used to predict future stock prices, which would indicate weak form efficiency. Therefore, serial correlation supports weak form efficiency.

Serial Correlation