Abstract
This study aims to re-examine the market efficiencies in New Zealand Stock Exchange (NZSE) and Australia Stock Exchange (ASX) stock indices to investigate whether Groenewold’s[1] findings still hold in the period after the financial liberalization (January 1990-January 2003). In addition, the study also examines whether the larger US NYSE and Japanese NIKKEI stock indices have any influence on the NZSE and ASX indices. Similar to Groenewold’s findings, we find evidence of weak form efficiency for NZSE and ASX stock indices using the Augmented-Dickey Fuller and Philip-Perron unit root tests. In contrast to Groenewold’s findings, the Engle-Granger cointegration test results suggest that the NZSE stock index is cointegrated with and granger caused by the ASX index, both violating the semi-strong form market efficiency of NZSE. Although the NZSE is a small stock market, its stock index is relatively independent with respect to the NYSE and NIKKEI stock indices.
Highlights
The New Zealand Stock Exchange (NZSE) is one of the least regulated stock markets in the world
This implies that NZSEALL is positively related with Australian Stock Exchange (ASX) and NIKKEI but negatively related to New York Stock Exchange (NYSE)
The results showed that all stock indexes in level
Summary
The New Zealand Stock Exchange (NZSE) is one of the least regulated stock markets in the world. Compared to most other countries, New Zealand does not impose any statutory control on the Stock Exchange’s listing rules. Before May 2003, the NZSE publishes five stock indexes namely, the NZSE10, NZSE30, NZSE40, NZSESC and NZSEALL. This study uses the NZSE40 together with the NZSEALL as a proxy for the movement of the New Zealand stock market. The Barclay’s Index will be used as the proxy for NZSE stock index before 1992 in this study. From June 3, 2003 the NZSE changed to the NZX and the NZSE50 replaced the NZSE40 as the officially published New Zealand Stock Index. This change will not affect our findings
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