Are Intraday Returns Autocorrelated?

The presence of autocorrelated nancial returns has major implications for investment decisions.Unsurprisingly, therefore, numerous studies have sought to shed light on whether returns areautocorrelated or not, to what extent, and when. Standard tests for autocorrelation rely onthe assumption of strict stationarity of returns, possibly after a suitable transformation. Recentstudies, however, reveal that intraday nancial returns are often characterised by a subtle formof non-stationarity that cannot be transformed away, namely non-stationary periodicity in thezero-process. Here, we propose tests for autocorrelation that are valid under this (and otherforms) of non-stationarity. The tests are simple to implement, and well-sized and powerful asdocumented in our Monte Carlo simulations. Next, in a study of the intraday returns of stocksand exchange rates, our robust tests document that returns are rarely autocorrelated. This is insharp contrast to the standard benchmark test, which spuriously detects a substantial numberof autocorrelations. Moreover, stability analyses with our robust tests suggest the signi canceof the autocorrelations is short-lived and very erratic. So it is unclear whether the short-livedautocorrelations can be used to inform decision-making.