Explain the term Serial Autocorrelation
Explain the term Serial Autocorrelation.
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SAC stands for Serial autocorrelation is a temporal correlation among a time series and itself, meaning that a move inside as, a stock price one day is not independent of the stock move on an earlier day. Typically in quantitative finance we suppose that there is no such memory, it’s what Markov means. We can measure, and model, as serial autocorrelation with various ‘lags.’ We can look at the SAC along with a one-day lag, it would be the correlation among moves one day and the day before, or along with a two-day lag, which would be the correlation among moves and moves two days before, etc.
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