# What is autocorrelation of prices?

In my econometrics and economics classes, the term autocorrelation has come up this quarter. I have read the Wikipedia pages about it and tried to understand them, but they are a bit beyond me. They use too much math from signal analysis that I don't have time to study at the moment. But I would still like to understand the general idea.

Can someone provide a brief explanation of what autocorrelation is and how this concept is used to understand price and analyze price trends?

• statisticssolutions.com/autocorrelation That contains intuitive explanations with little or no math. It also includes a few useful examples. Check it out. – 123 May 23 '16 at 15:47

Now, when it comes to prices, it simply means that the price of a good today helps predicting its price for tomorrow. Take currencies: If 1€ = USD \$1.1193 today, it would be very unlikely (but never impossible) that 1€ = USD \$10 tomorrow. It is more likely that the price will be around USD \\$1.1193.