hard · Market Microstructure
If the variance of 1-day returns for a stock is 0.0009 and the variance of 10-day returns is 0.0072, what is the Variance Ratio (VR(10)) and what does it imply about the price process?
- 1.00; implies a pure random walk.
- 0.80; implies mean reversion (transitory volatility).
- 1.25; implies momentum (positive autocorrelation).
- 0.08; implies extreme illiquidity.
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