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Trading behaviour of stocks added to New Zealand's NZSE40 index

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  • David Hyland
  • Steve Swidler

Abstract

This paper looks at the addition of stocks to New Zealand's NZSE40 index and investigates whether price and volume effects support the price pressure hypothesis or the informational efficiencies described by Merton's attention hypothesis. Unlike the US experience, a description of trading on the New Zealand Stock Exchange includes: (1) mechanical index listing rules; (2) few index arbitrage opportunities; and (3) less liquid markets. The empirical results support the attention hypothesis and suggest informational efficiencies that lower a firm's cost of capital.

Suggested Citation

  • David Hyland & Steve Swidler, 2002. "Trading behaviour of stocks added to New Zealand's NZSE40 index," Applied Economics Letters, Taylor & Francis Journals, vol. 9(5), pages 301-304.
    • Handle: RePEc:taf:apeclt:v:9:y:2002:i:5:p:301-304
    DOI: 10.1080/13504850110065867
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    Cited by:

    1. Daniel Chai & Daniel Choi, 2010. "The investor recognition hypothesis: the New Zealand case," Applied Financial Economics, Taylor & Francis Journals, vol. 20(11), pages 891-898.
    2. Sascha Wilkens & Jens Wimschulte, 2005. "Price and Volume Effects Associated with 2003’s Major Reorganization of German Stock Indices," Financial Markets and Portfolio Management, Springer;Swiss Society for Financial Market Research, vol. 19(1), pages 61-98, June.

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