To read the full version of this content please select one of the options below:

An empirical analysis of the NZX's price query system

Alastair Marsden (Department of Accounting and Finance, University of Auckland, Auckland, New Zealand)
Russell Poskitt (Department of Accounting and Finance, University of Auckland, Auckland, New Zealand)
Cherry Wang (Department of Accounting and Finance, University of Auckland, Auckland, New Zealand)

Pacific Accounting Review

ISSN: 0114-0582

Article publication date: 16 May 2008

Abstract

Purpose

The purpose of this paper is to examine the proposition that unexplained price and volume movements detected by the New Zealand Exchange's (“NZX”) surveillance staff reflect speculative trading.

Design/methodology/approach

The paper examines a sample of 98 price queries issued by the NZX between 1996 and 2004 where the company responded with a “no news” announcement to the NZX query. The sample is partitioned between queries of price increases and queries of price decreases. A market model is employed to estimate abnormal returns over the event window period [−30, 30] where day 0 is the date the price query is issued.

Findings

The paper finds evidence of large abnormal returns in the immediate pre‐query period but only a partial reversal in the post‐query period following the “no news” announcements.

Research limitations/implications

The absence of a full reversal of the pre‐query abnormal return is interpreted as evidence that prices are being set by informed traders rather than by uninformed or speculative traders. Further research is required to determine whether this reflects breaches of either the continuous disclosure regime or insider trading regulations.

Originality/value

The paper presents the first systematic analysis of the NZX's price query system. The empirical results show that price movements that generate price queries and subsequent “no news” announcements should not be dismissed as mere speculation.

Keywords

Citation

Marsden, A., Poskitt, R. and Wang, C. (2008), "An empirical analysis of the NZX's price query system", Pacific Accounting Review, Vol. 20 No. 1, pp. 4-28. https://doi.org/10.1108/01140580810872825

Publisher

:

Emerald Group Publishing Limited

Copyright © 2008, Emerald Group Publishing Limited