Exploring the principal factors driving the volatility structure of stock trade levels in New Zealand: a Covid-19 perspective

Sudhir Madaree

New Zealand Economic Papers, 2025, vol. 59, issue 2, 136-147

Abstract: This paper explores factors that drive the volatility structure of New Zealand stock trade levels, with the aim of understanding unusual volatility of stock trade levels that may pose a risk to the critical operations of a trading venue. Weekly number of trades from 2014–2024 for the sampled stocks were examined within principal axis factoring (PAF) and GARCH models. The results showed that three factors accounted for around 60% of volatility in the number of stock trades over the sample period; they were driven primarily by electricity generation stocks, consumer discretionary stocks, and commercial property stocks respectively. During the sample period, two subperiods of market shock showed unusual levels of volatility in all principal factors, with the second subperiod, which coincided with the Covid-19 outbreak, being particularly notable. An implication of the study is that given the volatilities of stock trade levels are little studied in the literature, the findings of this study could be a useful complement to existing studies examining stock price volatility for the purposes of mitigating unusual stock trading volatility.

Date: 2025
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DOI: 10.1080/00779954.2024.2415140

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