Exploitable cross autocorrelations among iShares

Abstract

We extend the evidence on exploitable cross autocorrelations in equity returns by examining whether individual investors can exploit cross autocorrelations in Standard and Poor’s Depository Receipts and iShares international index funds of 17 countries. Empirical testing reveals that iShares exhibit predictable elements that could be exploited by investors on a before transaction cost basis. We then compute bid-ask spreads and liquidity spreads to determine their affect on the risk-adjusted returns of the trading strategies. We find that transactions costs are generally high and that investors would need to be very cautious in placing trades to exploit returns patterns.