A revisit of price discovery dynamics across Australia and New Zealand

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Authors
Dassanayake, Wajira
Li, Xiaoming
Buhr, Klaus
Author ORCID Profiles (clickable)
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Grantor
Date
2015-08-26
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Type
Journal Article
Ngā Upoko Tukutuku (Māori subject headings)
Keyword
price discovery
cross-listings
market microstructure
international stock markets
Citation
Dassanayake, W., Li, X. and Buhr, K. (2015). A revisit of price discovery dynamics across Australia and New Zealand. Unitec ePress Research Report Series (3). Retrieved from http://www.unitec.ac.nz/epress/
Abstract
This study re-investigates the price discovery dynamics of selected stocks cross-listed on the Australian Stock Exchange (ASX) and the New Zealand Stock Exchange (NZX) during a bear trading phase from January 2008 to December 2011. A differing price discovery dynamic in a bear market versus a bull market may occur because of variations in investor sentiments and disparities in the role of the stock prices. Using intraday data, we employ the vector error correction mechanism, Hasbrouck’s (1995) information share and Grammig et al.’s (2005) conditional information share methods. Consistent with previous research, we find that price discovery takes place mostly on the home market for the Australian firms and for all but one of the New Zealand firms. However, not seen in existing studies, we show that the NZX has grown in importance for both the Australian and New Zealand firms. This suggests that the NZX is deviating from being a pure satellite market.
Publisher
Unitec ePress
DOI
Copyright holder
Unitec ePress
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Creative Commons Attribution-NonCommercial 4.0 International License.
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