Use finance.yahoo.com to download daily prices for five U.S. stocks for a recent five-year period. For each stock, construct a scatter diagram of successive returns as in Figure 13.1. Calculate the correlation between the returns on successive days. Do you find any consistent patterns?

Figure 13.1

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Rlo Tinto (correlation = .010) Microsoft (correlation = -.037) 4 3 2 - -2 -3 -3 -4 -4 -5 -5 -5 -3 -1 -5 -3 -1 1 Return on day t, % Return on day t, % Marks & Spencer (correlation = -.020) Philips (correlation = .004) -2 -3 -3 -4 - -4 -5 -5 -5 -3 -1 1 3 -5 -3 -1 Return on day t, % Return on day t, % 4. 3. Retum on day t +1,% 2. 4. Return on day t + 1, % LO Retum on day t +1,% 3. Return on day t+ 1, %