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This article employs a Fractionally Integrated Vector Error Correction Model (FIVECM) to examine the return transmission between the Australian and New Zealand stock markets and the Australian and the United States stock markets. We augment the FIVECM with a multivariate GARCH model. In so doing, the first and second moments spill over between stock market indices are simultaneously revealed. Our empirical results suggest that the Australian stock market has stronger ties with the United States stock market than with the New Zealand stock market. We conclude that stock market movements in the United States, as the world's economic superpower, are more important to the Australian stock market than stock market movements in New Zealand, Australia's closest neighbour.
