According to the LeBaron effect, serial correlation is low when volatility is high and vice-versa. We show that
it is true only for the predictable part of the volatility, while volatility which cannot be forecasted is positively
linked to serial correlation. Since the mechanism of price formation can be very different in small and large
markets we investigate the effect of volatility on intraday serial correlation in Italy (a small market) and U.S. (a
large market). We find substantial differences in the impact of volatility in the two markets.
We study the serial correlation of high-frequency intraday returns on the Italian stock index futures (FIB30) in the period 2000-2002. We adopt three different methods of analysis: the spectral density via Fast Fourier Transform, Detrended Fluctuation Analysis (DFA) and the Variance Ratio test. We find that intraday autocorrelation is mostly negative for time scales lower than 20 minutes, but we support the efficiency of the Italian futures market.