Cross-sectional determinants of New Zealand share market returns

We present evidence of the cross-sectional relation between security returns, beta, firm size and book-to-market ratio over the period 1971 to 1993 on the New Zealand sharemarket. Our results suggest that the NZSE-40 market index is not a mean-variance efficient market proxy—the betas calculated with respect to it being of little use for explaining expected returns cross-sectionally. Also, there is a significant positive relation between book-to-market ratio and average return.