Question: Explain how absolute returns can have large autocorrelations, as shown in Figure 1.31, when the returns themselves are uncorrelated. Does this make sense? FIGURE 1.31:

Explain how absolute returns can have large autocorrelations, as shown in Figure 1.31, when the returns themselves are uncorrelated. Does this make sense?

FIGURE 1.31:

ACF ON 0.00 0.05 0.15 0.10 0.25 0.20 0.30 Autocorrelations in Absolute

ACF ON 0.00 0.05 0.15 0.10 0.25 0.20 0.30 Autocorrelations in Absolute Daily Returns of S&P 500 0 100 200 300 400 500 Lag

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