Information diffusion and the predictability of New Zealand stock market returns. (17th September 2014)

• Record Type: Journal Article
• Authors: Lin, Hai; Quill, Daniel
• Editors: Berkman, Henk
• Is Part Of: Accounting and finance. Volume 56:Number 3(2016:Sep.)
• Page Start: 749
• Page End: 785
• Publication Date: 2014-09-17
• Subjects: Information diffusion -- International predictors -- Liquidity -- Out‐of‐sample -- Stock return predictability; Accounting -- Periodicals; Finance -- Periodicals; 657.05
• DOI: 10.1111/acfi.12091
• Languages: English
• ISSNs: 0810-5391

Abstract

Abstract: This paper examines the impact of international predictors from liquid markets on the predictability of excess returns in the New Zealand stock market using data from May 1992 to February 2011. We find that US stock market return and VIX contribute significantly to the out‐of‐sample forecasts at short horizons even after controlling for the effect of local predictors, while the contribution by Australian stock market return is not significant. We further demonstrate that the predictability of New Zealand stock market returns using US market predictors could be explained by the information diffusion between these two countries.