How to find lead-lag relation in two time series?
You want to use returns, not prices. Correlations with prices are spurious. (The extreme example is to think of a long set of series with inflation -- all the price series will be positively correlated.)
On 19/02/2010 23:15, Michael Jungle wrote:
One possibility is to do the cross-correlation. What series shall I apply cross-correlation to? Price or return series? If I do cross-correlation on two price series, and found some large correlation numbers, and then do cross-correlation on two return series, and found no significant numbers(almost zero), What does that mean?
Patrick Burns patrick at burns-stat.com http://www.burns-stat.com