Dynamic linkages between monetary policy and the stock market: the case of South Africa
- Authors: Mabitle, Mope
- Date: 2013
- Subjects: Johannesburg Stock Exchange , South African Reserve Bank , Monetary policy -- South Africa
- Language: English
- Type: Thesis , Masters , M Com
- Identifier: vital:11483 , http://hdl.handle.net/10353/d1015290 , Johannesburg Stock Exchange , South African Reserve Bank , Monetary policy -- South Africa
- Description: This study analyses the linkage between monetary policy and the stock market in South Africa using monthly data for the period from 2000 to 2010. It provides an overview of the Johannesburg Stock Exchange and the monetary regimes adopted by the South African Reserve Bank since the 1960s and the interrelation between the monetary variables and the stock market. It also provides a review of literature, both theoretical and empirical on the linkages between the two variables. Based on the review of literature, a Vector Autoregression [VAR] model was chosen as a method of analyzing the relationship between the two variables. The empirical results revealed that there is no long term relationship between the variables, however, in the short-run there is a dynamic relationship between monetary policy and the stock market in South Africa. This implies that innovations in the stock market affect the implementation of monetary policy and vice-versa. The study recommended that monetary authorities should pay attention to the fact that the stock market performance has a great impact on their decision making due to the fact it is greatly affected by repo rates.
- Full Text:
- Authors: Mabitle, Mope
- Date: 2013
- Subjects: Johannesburg Stock Exchange , South African Reserve Bank , Monetary policy -- South Africa
- Language: English
- Type: Thesis , Masters , M Com
- Identifier: vital:11483 , http://hdl.handle.net/10353/d1015290 , Johannesburg Stock Exchange , South African Reserve Bank , Monetary policy -- South Africa
- Description: This study analyses the linkage between monetary policy and the stock market in South Africa using monthly data for the period from 2000 to 2010. It provides an overview of the Johannesburg Stock Exchange and the monetary regimes adopted by the South African Reserve Bank since the 1960s and the interrelation between the monetary variables and the stock market. It also provides a review of literature, both theoretical and empirical on the linkages between the two variables. Based on the review of literature, a Vector Autoregression [VAR] model was chosen as a method of analyzing the relationship between the two variables. The empirical results revealed that there is no long term relationship between the variables, however, in the short-run there is a dynamic relationship between monetary policy and the stock market in South Africa. This implies that innovations in the stock market affect the implementation of monetary policy and vice-versa. The study recommended that monetary authorities should pay attention to the fact that the stock market performance has a great impact on their decision making due to the fact it is greatly affected by repo rates.
- Full Text:
Testing random walk hypothesis in the stock market prices: evidence from South Africa's stock exchange (2000- 2011)
- Chitenderu, Tafadzwa Thelmah
- Authors: Chitenderu, Tafadzwa Thelmah
- Date: 2013
- Subjects: Johannesburg Stock Exchange , Stock exchanges -- South Africa -- Johannesburg , Random walks (Mathematics)
- Language: English
- Type: Thesis , Masters , M Com
- Identifier: vital:11461 , http://hdl.handle.net/10353/d1006931 , Johannesburg Stock Exchange , Stock exchanges -- South Africa -- Johannesburg , Random walks (Mathematics)
- Description: The Johannesburg Stock Exchange market was tested for the existence of the random walk hypothesis using All Share Index (ALSI) and time series data for the period between 2000 and 2011. The traditionally used methods, the unit root tests and autocorrelation test were employed first and they all confirmed that during the period under consideration, the JSE price index followed the random walk process. In addition, the ARIMA model was built and it was found that the ARIMA ( 1, 1, 1) was the model that best fitted the data in question. Furthermore, residual tests to help determine whether the residuals of the estimated equation show random walk process in the series were done. It was found that the ALSI resembles series that follow random walk hypothesis with strong evidence of RWH indicated in the conducted forecasting tests which showed vast variance between forecasted values and actual indicating little or no forecasting strength in the series. To further validate the findings in this research, the variance ratio test was conducted under heteroscedasticity and it also strongly corroborated that the existence of a random walk process cannot be rejected in the JSE. It was concluded that since the returns follow the random walk hypothesis, it can be said that JSE is efficient in the weak form level of the EMH and therefore opportunities of making excess returns based on out- performing the market is ruled out and is merely a game of chance. In other words, it will be of no use to choose stocks based on information about recent trends in stock prices.
- Full Text:
- Authors: Chitenderu, Tafadzwa Thelmah
- Date: 2013
- Subjects: Johannesburg Stock Exchange , Stock exchanges -- South Africa -- Johannesburg , Random walks (Mathematics)
- Language: English
- Type: Thesis , Masters , M Com
- Identifier: vital:11461 , http://hdl.handle.net/10353/d1006931 , Johannesburg Stock Exchange , Stock exchanges -- South Africa -- Johannesburg , Random walks (Mathematics)
- Description: The Johannesburg Stock Exchange market was tested for the existence of the random walk hypothesis using All Share Index (ALSI) and time series data for the period between 2000 and 2011. The traditionally used methods, the unit root tests and autocorrelation test were employed first and they all confirmed that during the period under consideration, the JSE price index followed the random walk process. In addition, the ARIMA model was built and it was found that the ARIMA ( 1, 1, 1) was the model that best fitted the data in question. Furthermore, residual tests to help determine whether the residuals of the estimated equation show random walk process in the series were done. It was found that the ALSI resembles series that follow random walk hypothesis with strong evidence of RWH indicated in the conducted forecasting tests which showed vast variance between forecasted values and actual indicating little or no forecasting strength in the series. To further validate the findings in this research, the variance ratio test was conducted under heteroscedasticity and it also strongly corroborated that the existence of a random walk process cannot be rejected in the JSE. It was concluded that since the returns follow the random walk hypothesis, it can be said that JSE is efficient in the weak form level of the EMH and therefore opportunities of making excess returns based on out- performing the market is ruled out and is merely a game of chance. In other words, it will be of no use to choose stocks based on information about recent trends in stock prices.
- Full Text:
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