four or five of these weekly observations would exhibit first-order serial correlations of about the magnitude Kendall found for cotton. So Kendall's exception vanishes, and we are left with the conclusion that at least for the series he investigated the serial correlations were not significantly different from zero. 4 But the question immediately arises whether a week is not an inappropriate period of observation, The market analysts might Pro ng smooth underlying movement on which is typically superimposed lot of short-term fluctuation. With weekly observations the short term fluctuations might very easily swamp the underlying trends In particular, the give and take of the market leads to a phenome on,recognized by all analysts, of reactions, usually called tech nical presumably associated with profit hese reactions are, of course, negatively correlated with the main price swings. That's what makes them reactions. Kendall's correla tions, close to zero, could possibly be a consequence of the com bination of the negative contributions of the reactions and the positive contributions of the trends The path of a speculative price might, accordingly, be repre sented by a sum of two components, a smooth underlying trend or cycle changing direction only infrequently, and a much shorter cycle of action and reaction,. Under this hypothesis the first-order serial correlations of daily price changes might be negative, the first order correlation of weekly changes might be close to zero, phile the first order serial correlations of monthly or bimonthly changes might be significantly larger than zero We can test this possibility by studying the first order serial correlations of Kendall's data using successively longer intervals of differen , serial correlation of one week changes, then of two week, four eek, eight week, and sixteen week changes, the influence of the reactions should become smaller and smaller and the trend effect if there is one, should become do relations, roughly calculated, 5 are given in Table 1 his point was independently The latter r discove ered by the author and by Holbrook ver he pleasure of first publishing it in Note on the Correlation of First Differences of Averages in a Randor Chain,"Econometrica, Vol. 28, No. 4, October 1960, pp.916-918. Another possible exception may be noted for Kendall's series 3, Invest ment Trusts, whose first five serial correlations were.301.0.356, 0.158 0. 164 and 0.066. This series will be mentioned again below. oughly, because they were computed, not from the original data, but rom the serial correlations published by Kendall. Since successive serial correlations are based on fewer observations because of the necessity of sacrificing end terms, a certain #lend term error is introduced by this procedure