Efficient market hypothesis in South Africa: an analysis using the flexible form unit root test
- Authors: Nomatye, Anelisa
- Date: 2019
- Subjects: Stocks -- Prices -- South Africa , Stock exchanges -- South Africa Stocks -- South Africa Johannesburg Stock Exchange Economic indicators -- South Africa
- Language: English
- Type: Thesis , Masters , MCom
- Identifier: http://hdl.handle.net/10948/42825 , vital:36697
- Description: An efficient stock market is characterised by prices that are reflective of all the information such that there are no opportunities for arbitrageurs. In an efficient market, it is impossible to beat the market, therefore it follows that stock prices in an efficient market should follow a random walk. This study investigates whether the Johannesburg Stock Exchange (JSE) is an efficient market using the JSE Top 40 listed stocks, thus the relevance of the EMH in the current South African market is analysed. A corerlation analysis is undertaken to find whether the individual stocks in the different sectors are correlated in their returns, or if there are any intersector correlations. This analysis showed that individual sector stocks are mostly correlated, however, the individual sector stocks do not show a relationship with common sectors. The data used is monthly data of the individual stocks from 31 January 1999 to 30 June 2018. The study takes into consideration that the period is post the Asian Contagion and during the dot.com bubble. Also considered is the Global Financial crisis that occurred in 2007/2008. The study period thus allows enough time for market corerction. The study utilises the conventional unit root tests; the augmented Dickey-Fuller (ADF), Phillips- Perron (PP) and the Kwiatkowski–Phillips–Schmidt–Shin (KPSS) tests. Also utilised are modified unit root tests of Elliot, Rothenburg and Stock (ERS) (1996) as well as Ng and Perron (2001). Due to criticisms of the initially utilised unit roots, the nonlinear test of Kapetanois et al. (2003) and the Flexible Fourier form (FFF) is employed. Based on the empirical analysis, the study demonstrates that although the studies received conflicting evidence the FFF demonstrates the most “power” of the tests, thus is deemed to provide more accurate results. This test provided evidence of stationarity in the JSE market, thus implying inefficiency. The results were different for only two of the forty stocks, namely, Shoprite and Bidvest which implied efficiency. The study thus found that the EMH is not relevant to the current South African market and other theories should be considered in analysing the market. This also provides a case for behavioural finance to be analysed, as the assumption that all investors are rational is questioned.
- Full Text:
- Date Issued: 2019
- Authors: Nomatye, Anelisa
- Date: 2019
- Subjects: Stocks -- Prices -- South Africa , Stock exchanges -- South Africa Stocks -- South Africa Johannesburg Stock Exchange Economic indicators -- South Africa
- Language: English
- Type: Thesis , Masters , MCom
- Identifier: http://hdl.handle.net/10948/42825 , vital:36697
- Description: An efficient stock market is characterised by prices that are reflective of all the information such that there are no opportunities for arbitrageurs. In an efficient market, it is impossible to beat the market, therefore it follows that stock prices in an efficient market should follow a random walk. This study investigates whether the Johannesburg Stock Exchange (JSE) is an efficient market using the JSE Top 40 listed stocks, thus the relevance of the EMH in the current South African market is analysed. A corerlation analysis is undertaken to find whether the individual stocks in the different sectors are correlated in their returns, or if there are any intersector correlations. This analysis showed that individual sector stocks are mostly correlated, however, the individual sector stocks do not show a relationship with common sectors. The data used is monthly data of the individual stocks from 31 January 1999 to 30 June 2018. The study takes into consideration that the period is post the Asian Contagion and during the dot.com bubble. Also considered is the Global Financial crisis that occurred in 2007/2008. The study period thus allows enough time for market corerction. The study utilises the conventional unit root tests; the augmented Dickey-Fuller (ADF), Phillips- Perron (PP) and the Kwiatkowski–Phillips–Schmidt–Shin (KPSS) tests. Also utilised are modified unit root tests of Elliot, Rothenburg and Stock (ERS) (1996) as well as Ng and Perron (2001). Due to criticisms of the initially utilised unit roots, the nonlinear test of Kapetanois et al. (2003) and the Flexible Fourier form (FFF) is employed. Based on the empirical analysis, the study demonstrates that although the studies received conflicting evidence the FFF demonstrates the most “power” of the tests, thus is deemed to provide more accurate results. This test provided evidence of stationarity in the JSE market, thus implying inefficiency. The results were different for only two of the forty stocks, namely, Shoprite and Bidvest which implied efficiency. The study thus found that the EMH is not relevant to the current South African market and other theories should be considered in analysing the market. This also provides a case for behavioural finance to be analysed, as the assumption that all investors are rational is questioned.
- Full Text:
- Date Issued: 2019
The impact of unanticipated news announcements by the US Federal Reserve On South African stock returns
- Authors: Sibanda, Lorna
- Date: 2019
- Subjects: Monetary policy -- United States , International finance , South Africa -- Foreign economic relations -- United States , United States -- Foreign economic relations -- South Africa , Banks of issue -- United States , Investments -- South Africa , Stocks -- Prices -- South Africa , Stocks -- Rate of return , Rate of return -- South Africa
- Language: English
- Type: text , Thesis , Masters , MCom
- Identifier: http://hdl.handle.net/10962/94703 , vital:31070
- Description: This thesis analyses whether monetary policy announcement shocks are transmitted across countries, with special emphasis on the impact of US Federal Reserve announcements on the South African stock market. Monetary policy is an important source of economic news and affects the risk perceptions of market participants. This study will improve the understanding of stock price determinants and possibly influence SA monetary policy in guarding against possible shocks originating from abroad. Using Federal Reserve Open Market Committee (FOMC) announcements over the period 2008 – 2014, the research studied changes in volatility of the South African FTSE/JSE All Share Index returns over this period. An event study and GARCH model approach was adopted to reach the goals of the analysis. The findings were a statistically insignificant connection between SA stock returns and both anticipated and unanticipated US Federal Reserve announcements. Over the sample period, each shock to SA stock returns persisted for approximately 4-5 months. Although SA stock return volatility demonstrated clustering behaviour (indicating sensitivity to economic shocks), the research could not find an obvious relationship between these spikes in volatility and US Federal Reserve announcements. It is concluded that South African stock returns do not change in response to unexpected US monetary policy announcements.
- Full Text:
- Date Issued: 2019
- Authors: Sibanda, Lorna
- Date: 2019
- Subjects: Monetary policy -- United States , International finance , South Africa -- Foreign economic relations -- United States , United States -- Foreign economic relations -- South Africa , Banks of issue -- United States , Investments -- South Africa , Stocks -- Prices -- South Africa , Stocks -- Rate of return , Rate of return -- South Africa
- Language: English
- Type: text , Thesis , Masters , MCom
- Identifier: http://hdl.handle.net/10962/94703 , vital:31070
- Description: This thesis analyses whether monetary policy announcement shocks are transmitted across countries, with special emphasis on the impact of US Federal Reserve announcements on the South African stock market. Monetary policy is an important source of economic news and affects the risk perceptions of market participants. This study will improve the understanding of stock price determinants and possibly influence SA monetary policy in guarding against possible shocks originating from abroad. Using Federal Reserve Open Market Committee (FOMC) announcements over the period 2008 – 2014, the research studied changes in volatility of the South African FTSE/JSE All Share Index returns over this period. An event study and GARCH model approach was adopted to reach the goals of the analysis. The findings were a statistically insignificant connection between SA stock returns and both anticipated and unanticipated US Federal Reserve announcements. Over the sample period, each shock to SA stock returns persisted for approximately 4-5 months. Although SA stock return volatility demonstrated clustering behaviour (indicating sensitivity to economic shocks), the research could not find an obvious relationship between these spikes in volatility and US Federal Reserve announcements. It is concluded that South African stock returns do not change in response to unexpected US monetary policy announcements.
- Full Text:
- Date Issued: 2019
Platinum share prices and the Marikana tragedy: an event study
- Authors: Sunga, Tapuwa Terence
- Date: 2014
- Subjects: Marikana (Rustenburg, South Africa) , Massacres -- South Africa -- Rustenburg , Stocks -- Prices -- South Africa , Stocks -- Prices -- Mathematical models
- Language: English
- Type: Thesis , Masters , MCom
- Identifier: vital:1094 , http://hdl.handle.net/10962/d1013002
- Description: An event study is an economic tool of analysis that has begun to gain popularity in recent empirical literature. It is a technique that gives a researcher the opportunity to map out the reaction of a firm's stock to an event, usually making use of daily or monthly data. However, up to this point, event study methodology has generally been applied to more traditional phenomena capable of affecting equity value, such as dividend and macroeconomic policy announcements, and there have only been a few exceptions to this. This study looks at what impact the tragic shootings at Lonmin mine in Marikana on August 16th 2012 had on the share prices of platinum mining firms based in South Africa using event study methodology. It makes use of the technique to investigate how the share prices responded to the tragedy over a number of trading days, including the day of the shootings. To be best of our knowledge, no attempt has been made to analyse the impact on share prices using events of this nature. For the investigation, daily returns data was used for each firm. The abnormal returns and cumulative abnormal returns to each were then calculated and compared with their respective expected returns in order to determine whether investors in the shares of that particular firm reacted positively, negatively or not at all. The evidence found suggests that tragedies of this nature are capable of influencing share prices in the same manner as more traditional economic phenomena. Overall, only one firm was found to have been negatively affected by the shootings in a persistent manner, while the shares of the other firms examined reacted in a manner that was positive overall, but varied according to individual firm characteristics such as size. These finding conformed to our a priori expectations. In addition, the results also confirm the benefits of applying event study methodology to a wide variety of phenomena that fall outside the boundaries usually associated with business.
- Full Text:
- Date Issued: 2014
- Authors: Sunga, Tapuwa Terence
- Date: 2014
- Subjects: Marikana (Rustenburg, South Africa) , Massacres -- South Africa -- Rustenburg , Stocks -- Prices -- South Africa , Stocks -- Prices -- Mathematical models
- Language: English
- Type: Thesis , Masters , MCom
- Identifier: vital:1094 , http://hdl.handle.net/10962/d1013002
- Description: An event study is an economic tool of analysis that has begun to gain popularity in recent empirical literature. It is a technique that gives a researcher the opportunity to map out the reaction of a firm's stock to an event, usually making use of daily or monthly data. However, up to this point, event study methodology has generally been applied to more traditional phenomena capable of affecting equity value, such as dividend and macroeconomic policy announcements, and there have only been a few exceptions to this. This study looks at what impact the tragic shootings at Lonmin mine in Marikana on August 16th 2012 had on the share prices of platinum mining firms based in South Africa using event study methodology. It makes use of the technique to investigate how the share prices responded to the tragedy over a number of trading days, including the day of the shootings. To be best of our knowledge, no attempt has been made to analyse the impact on share prices using events of this nature. For the investigation, daily returns data was used for each firm. The abnormal returns and cumulative abnormal returns to each were then calculated and compared with their respective expected returns in order to determine whether investors in the shares of that particular firm reacted positively, negatively or not at all. The evidence found suggests that tragedies of this nature are capable of influencing share prices in the same manner as more traditional economic phenomena. Overall, only one firm was found to have been negatively affected by the shootings in a persistent manner, while the shares of the other firms examined reacted in a manner that was positive overall, but varied according to individual firm characteristics such as size. These finding conformed to our a priori expectations. In addition, the results also confirm the benefits of applying event study methodology to a wide variety of phenomena that fall outside the boundaries usually associated with business.
- Full Text:
- Date Issued: 2014
The relevance and fairness of the JSE ALTX PRE-IPO share pricing methodologies
- Authors: Magliolo, Jacques
- Date: 2012
- Subjects: Johannesburg Stock Exchange , Stocks -- Prices -- South Africa , Capital market -- South Africa , Stocks -- Prices -- South Africa -- Econometric models
- Language: English
- Type: Thesis , Masters , MCom
- Identifier: vital:9018 , http://hdl.handle.net/10948/d1018652
- Description: This three year indepth study was prompted after a decade of working as a corporate advisor for numerous stockbroking firms' corporate advisory and listing divisions. An overwhelming lack of discernible pricing methodology for IPOs on the JSE's Main Board and failed Venture Capital and Development Capital Markets was transferred to the new Alternative Exchange (AltX). This prompted lengthly discussions with former head of JSE's AltX Noah Greenhill. Such discussions are set out in this dissertation and relate to pricing methodologies and the lack of guidance or legislation as set out in the JSE's schedule 21 of Listing requirements. The focus of this dissertation is thus centred on whether the current adopted methodologies to establish a fair and reasonable pre-IPO share price is effective. To achieve this, global pricing methodologies were assessed within the framework of various valuation techniques used by South African Designated Advisors.
- Full Text:
- Date Issued: 2012
- Authors: Magliolo, Jacques
- Date: 2012
- Subjects: Johannesburg Stock Exchange , Stocks -- Prices -- South Africa , Capital market -- South Africa , Stocks -- Prices -- South Africa -- Econometric models
- Language: English
- Type: Thesis , Masters , MCom
- Identifier: vital:9018 , http://hdl.handle.net/10948/d1018652
- Description: This three year indepth study was prompted after a decade of working as a corporate advisor for numerous stockbroking firms' corporate advisory and listing divisions. An overwhelming lack of discernible pricing methodology for IPOs on the JSE's Main Board and failed Venture Capital and Development Capital Markets was transferred to the new Alternative Exchange (AltX). This prompted lengthly discussions with former head of JSE's AltX Noah Greenhill. Such discussions are set out in this dissertation and relate to pricing methodologies and the lack of guidance or legislation as set out in the JSE's schedule 21 of Listing requirements. The focus of this dissertation is thus centred on whether the current adopted methodologies to establish a fair and reasonable pre-IPO share price is effective. To achieve this, global pricing methodologies were assessed within the framework of various valuation techniques used by South African Designated Advisors.
- Full Text:
- Date Issued: 2012
Day-of-the-week effect : evidence from nine sectors of the South African stock market
- Authors: Mbululu, Douglas
- Date: 2010
- Subjects: Stock exchanges -- South Africa , Johannesburg Stock Exchange , Stocks -- Prices -- South Africa
- Language: English
- Type: Thesis , Masters , MCom
- Identifier: vital:1024 , http://hdl.handle.net/10962/d1002759 , Stock exchanges -- South Africa , Johannesburg Stock Exchange , Stocks -- Prices -- South Africa
- Description: The day-of-the-week effect in share prices is one of the most extensively researched anomalies, especially in developed markets. However, emerging African stock markets have received little attention in this regard. This study breaks new ground in using non-parametric tests directly on skewness and kurtosis to examine whether the day-of-he-week effect exists in nine listed stock market sector indices of the JSE Securities Exchange of South Africa (JSE). Different day-of-the-week effects were found to be present in the statistical moments of returns of these nine JSE sectors
- Full Text:
- Date Issued: 2010
- Authors: Mbululu, Douglas
- Date: 2010
- Subjects: Stock exchanges -- South Africa , Johannesburg Stock Exchange , Stocks -- Prices -- South Africa
- Language: English
- Type: Thesis , Masters , MCom
- Identifier: vital:1024 , http://hdl.handle.net/10962/d1002759 , Stock exchanges -- South Africa , Johannesburg Stock Exchange , Stocks -- Prices -- South Africa
- Description: The day-of-the-week effect in share prices is one of the most extensively researched anomalies, especially in developed markets. However, emerging African stock markets have received little attention in this regard. This study breaks new ground in using non-parametric tests directly on skewness and kurtosis to examine whether the day-of-he-week effect exists in nine listed stock market sector indices of the JSE Securities Exchange of South Africa (JSE). Different day-of-the-week effects were found to be present in the statistical moments of returns of these nine JSE sectors
- Full Text:
- Date Issued: 2010
An empirical investigation into the determinants of stock market behaviour in South Africa
- Authors: Olalere, Durodola Oludamola
- Date: 2007
- Subjects: Johannesburg Stock Exchange , Stocks -- Prices -- South Africa , Stock exchanges -- South Africa , Macroeconomics -- South Africa , Interest rates -- South Africa , Foreign exchange rates -- South Africa
- Language: English
- Type: Thesis , Masters , MCom
- Identifier: vital:998 , http://hdl.handle.net/10962/d1002733 , Johannesburg Stock Exchange , Stocks -- Prices -- South Africa , Stock exchanges -- South Africa , Macroeconomics -- South Africa , Interest rates -- South Africa , Foreign exchange rates -- South Africa
- Description: The argument with regards to whether macro-economic fundamentals determine stock market behaviour is very important because of the roles it plays in an economy. Such roles include: pooling and trading of risks, mobilization of savings, provision of liquidity and allocation of capital. However, the stock market will only perform such roles effectively if the macro-economic environment is conducive. This study examined the behaviour of the All Share Index (ALSI) and market capitalization on the Johannesburg Stock Exchange in response to changes in the domestic and international macro-economic fundamentals such as the consumer price index, rand-dollar real exchange rates, domestic GDP, yield on South African government bonds, yield on United States government bonds and United States GDP. The study used cointegration and error correction techniques proposed by Johansen and Juselius (1990) to test for long run relationship. Two separate models were estimated and results obtained show that the two proxies for the stock market behaviour (All share Index and market capitalization) are true endogenous variables, but react differently to economic fundamentals. The consumer price index has a significant negative impact on the JSE share price index while market capitalization is determined predominantly by the yield on South African government bonds. The exchange rate seems to have had little or no influence on the share price index, but becomes negative and significant in the case of market capitalization. The yield on United States government bonds also produced a strong influence on both the share price index and market capitalization. While it has a negative significant impact on share prices, it produced a positive significant impact on market capitalization. In order to ascertain whether the South African interest rate or the United States interest rate is more important in explaining the share price and market capitalization, each of the variables were estimated in the model separately, the result obtained reveals that the United States interest rate is more important than the domestic interest rate in explaining the share price and market capitalization on the JSE. This implies that investors need to observe the USA interest rate before investing in South African equities. A comparison of the responses of share price index and market capitalization to impulses from the macro-economic variables tested reveals that both proxies elicit a positive response from aggregate output. The share price index responds more significantly to impulses from output growth than the market capitalization, meaning that, as aggregate production increases, the share price index tends to respond positively and quickly. The exchange rate produced mixed result from the two proxies, while it produced a positive response from the market capitalization; an initial positive response was noted in the share price index that immediately turned negative. Another glaring contrast was identified in the response of both proxies to impulses from the United States interest rate. The share price index responded positively while the market capitalization produced a negative response. This finding reveals that the two proxies actually respond differently to macro-economic variables. The variance decomposition of both stock prices and market capitalization reveals that the yield on United States government bonds has a more significant absorption potential than the South African government bonds. However, the absorption process is slower in the case of the market capitalization. The exchange rate has a greater impact on the market capitalization than stock prices. The overall assessment shows that share prices respond faster than market capitalization to macro-economic fundamentals. The study also shows that the increased openness of the South African economy by way of relaxation of the exchange control on capital account transaction has allowed the USA market to play a crucial role in equity prices in South Africa. Three main policy recommendations results from the study. Firstly, if inflation is well monitored, then the local equity market is bound to perform strongly resulting in strong shares earning growth. Secondly, the exchange rate should be made to be less volatile so that long term investment plans across borders can be further enhanced. Thirdly, financial analyst and investors in South Africa need to analyse macro-economic developments in the United States before investing in equities in South Africa.
- Full Text:
- Date Issued: 2007
- Authors: Olalere, Durodola Oludamola
- Date: 2007
- Subjects: Johannesburg Stock Exchange , Stocks -- Prices -- South Africa , Stock exchanges -- South Africa , Macroeconomics -- South Africa , Interest rates -- South Africa , Foreign exchange rates -- South Africa
- Language: English
- Type: Thesis , Masters , MCom
- Identifier: vital:998 , http://hdl.handle.net/10962/d1002733 , Johannesburg Stock Exchange , Stocks -- Prices -- South Africa , Stock exchanges -- South Africa , Macroeconomics -- South Africa , Interest rates -- South Africa , Foreign exchange rates -- South Africa
- Description: The argument with regards to whether macro-economic fundamentals determine stock market behaviour is very important because of the roles it plays in an economy. Such roles include: pooling and trading of risks, mobilization of savings, provision of liquidity and allocation of capital. However, the stock market will only perform such roles effectively if the macro-economic environment is conducive. This study examined the behaviour of the All Share Index (ALSI) and market capitalization on the Johannesburg Stock Exchange in response to changes in the domestic and international macro-economic fundamentals such as the consumer price index, rand-dollar real exchange rates, domestic GDP, yield on South African government bonds, yield on United States government bonds and United States GDP. The study used cointegration and error correction techniques proposed by Johansen and Juselius (1990) to test for long run relationship. Two separate models were estimated and results obtained show that the two proxies for the stock market behaviour (All share Index and market capitalization) are true endogenous variables, but react differently to economic fundamentals. The consumer price index has a significant negative impact on the JSE share price index while market capitalization is determined predominantly by the yield on South African government bonds. The exchange rate seems to have had little or no influence on the share price index, but becomes negative and significant in the case of market capitalization. The yield on United States government bonds also produced a strong influence on both the share price index and market capitalization. While it has a negative significant impact on share prices, it produced a positive significant impact on market capitalization. In order to ascertain whether the South African interest rate or the United States interest rate is more important in explaining the share price and market capitalization, each of the variables were estimated in the model separately, the result obtained reveals that the United States interest rate is more important than the domestic interest rate in explaining the share price and market capitalization on the JSE. This implies that investors need to observe the USA interest rate before investing in South African equities. A comparison of the responses of share price index and market capitalization to impulses from the macro-economic variables tested reveals that both proxies elicit a positive response from aggregate output. The share price index responds more significantly to impulses from output growth than the market capitalization, meaning that, as aggregate production increases, the share price index tends to respond positively and quickly. The exchange rate produced mixed result from the two proxies, while it produced a positive response from the market capitalization; an initial positive response was noted in the share price index that immediately turned negative. Another glaring contrast was identified in the response of both proxies to impulses from the United States interest rate. The share price index responded positively while the market capitalization produced a negative response. This finding reveals that the two proxies actually respond differently to macro-economic variables. The variance decomposition of both stock prices and market capitalization reveals that the yield on United States government bonds has a more significant absorption potential than the South African government bonds. However, the absorption process is slower in the case of the market capitalization. The exchange rate has a greater impact on the market capitalization than stock prices. The overall assessment shows that share prices respond faster than market capitalization to macro-economic fundamentals. The study also shows that the increased openness of the South African economy by way of relaxation of the exchange control on capital account transaction has allowed the USA market to play a crucial role in equity prices in South Africa. Three main policy recommendations results from the study. Firstly, if inflation is well monitored, then the local equity market is bound to perform strongly resulting in strong shares earning growth. Secondly, the exchange rate should be made to be less volatile so that long term investment plans across borders can be further enhanced. Thirdly, financial analyst and investors in South Africa need to analyse macro-economic developments in the United States before investing in equities in South Africa.
- Full Text:
- Date Issued: 2007
Financial instability in South Africa : trends and interactions within the financial markets
- Authors: Shikwambana, Jamela
- Date: 2007 , 2013-08-06
- Subjects: Finance -- South Africa , Financial institutions -- South Africa , Economic stabilization -- South Africa , Stock exchanges -- South Africa , Stocks -- Prices -- South Africa , Interest rates -- South Africa , Equilibrium (Economics)
- Language: English
- Type: Thesis , Masters , MCom
- Identifier: vital:1043 , http://hdl.handle.net/10962/d1005911 , Finance -- South Africa , Financial institutions -- South Africa , Economic stabilization -- South Africa , Stock exchanges -- South Africa , Stocks -- Prices -- South Africa , Interest rates -- South Africa , Equilibrium (Economics)
- Description: This study seeks to investigate the trends and interactions of market volatility as a source of instability in the South African financial markets. Financial instability can be manifested in the form of banking and currency crisis, institutional failures and extreme asset price volatility. This study, however, focuses on a single aspect of financial instability - asset price volatility. Asset price volatility reflects changes in market expectations as investors react to such changes, and thus on its own is not necessarily a source of instability. However, volatility spillovers can propagate volatility shocks across the market, increasing the risk of widespread instability. Using a combination of graphical and trend analysis as well as more formal estimation techniques, the study examined volatility in the stock, money and foreign exchange markets. To obtain estimates of market volatility, the study experimented with various volatility models that include the GARCH, TARCH and EGARCH. An analysis of volatility interactions and the transmission of volatility shocks across the market is crucial to understanding financial instability. To examine volatility interaction and the transmission of volatility shocks, a VAR model was estimated. This framework allowed us to examine the propagation of shocks across the markets. Volatility in the financial markets was found to be highly persistent and in the case of exchange rates, volatility was also characterised by an increasing trend. Significant linkages between the financial markets were found. The links also extended to the volatility relationship as evidenced by significant volatility spillovers across the markets. While volatility spillovers from the money market were found in the stock market and the foreign exchange market, no volatility spillovers from these markets were found in the money market. Thus the money market was identified as the major source of volatility spillovers and shocks in the financial markets. These results highlighted the role of monetary policy in the financial system, specifically the need to make monetary policy stable and predictable to ensure that interest rate shocks are not an additional source of instability. , KMBT_363 , Adobe Acrobat 9.54 Paper Capture Plug-in
- Full Text:
- Date Issued: 2007
- Authors: Shikwambana, Jamela
- Date: 2007 , 2013-08-06
- Subjects: Finance -- South Africa , Financial institutions -- South Africa , Economic stabilization -- South Africa , Stock exchanges -- South Africa , Stocks -- Prices -- South Africa , Interest rates -- South Africa , Equilibrium (Economics)
- Language: English
- Type: Thesis , Masters , MCom
- Identifier: vital:1043 , http://hdl.handle.net/10962/d1005911 , Finance -- South Africa , Financial institutions -- South Africa , Economic stabilization -- South Africa , Stock exchanges -- South Africa , Stocks -- Prices -- South Africa , Interest rates -- South Africa , Equilibrium (Economics)
- Description: This study seeks to investigate the trends and interactions of market volatility as a source of instability in the South African financial markets. Financial instability can be manifested in the form of banking and currency crisis, institutional failures and extreme asset price volatility. This study, however, focuses on a single aspect of financial instability - asset price volatility. Asset price volatility reflects changes in market expectations as investors react to such changes, and thus on its own is not necessarily a source of instability. However, volatility spillovers can propagate volatility shocks across the market, increasing the risk of widespread instability. Using a combination of graphical and trend analysis as well as more formal estimation techniques, the study examined volatility in the stock, money and foreign exchange markets. To obtain estimates of market volatility, the study experimented with various volatility models that include the GARCH, TARCH and EGARCH. An analysis of volatility interactions and the transmission of volatility shocks across the market is crucial to understanding financial instability. To examine volatility interaction and the transmission of volatility shocks, a VAR model was estimated. This framework allowed us to examine the propagation of shocks across the markets. Volatility in the financial markets was found to be highly persistent and in the case of exchange rates, volatility was also characterised by an increasing trend. Significant linkages between the financial markets were found. The links also extended to the volatility relationship as evidenced by significant volatility spillovers across the markets. While volatility spillovers from the money market were found in the stock market and the foreign exchange market, no volatility spillovers from these markets were found in the money market. Thus the money market was identified as the major source of volatility spillovers and shocks in the financial markets. These results highlighted the role of monetary policy in the financial system, specifically the need to make monetary policy stable and predictable to ensure that interest rate shocks are not an additional source of instability. , KMBT_363 , Adobe Acrobat 9.54 Paper Capture Plug-in
- Full Text:
- Date Issued: 2007
The market efficiency hypothesis and the behaviour of stock returns on the JSE securities exchange
- Authors: Mabhunu, Mind
- Date: 2004
- Subjects: Johannesburg Stock Exchange , Stocks -- Prices -- South Africa , Stock exchanges -- South Africa
- Language: English
- Type: Thesis , Masters , MCom
- Identifier: vital:1027 , http://hdl.handle.net/10962/d1002762 , Johannesburg Stock Exchange , Stocks -- Prices -- South Africa , Stock exchanges -- South Africa
- Description: While the Efficient Market Hypothesis (EHM) has been widely accepted as robust by many researchers in the field of capital markets, the hypothesis’ robustness has been under increased scrutiny and question lately. In the light of the concerns over the robustness of the EMH, the weak form efficiency of the JSE is tested. Stock returns used in the analysis were controlled for thin trading and it was discovered that once returns are controlled for thin trading, they are independent of each other across time. Some of the previous studies found the JSE to be inefficient in the weak form but this research found that the JSE is efficient in the weak form. A comparison is also made between the JSE and four other African stock markets and the JSE is found to be more efficient than the other markets. The developments on the JSE, which have improved information dissemination as well as the efficiency of trading, contributed to the improvement of the JSE’s efficiency. The improvement in operational efficiency and turnover from the late 1990s has also made a major contribution to the improvement in the weak form efficiency of the JSE. Theory proposes that if markets are efficient then professional investment management is of little value if any; hence the position of professional investment managers in efficient markets is investigated. Although the JSE is found to be efficient, at least in the weak form, it is argued that achieving efficiency does not necessarily make the investment manager’s role obsolete. Investment managers are needed even when the market can be proved to be efficient.
- Full Text:
- Date Issued: 2004
- Authors: Mabhunu, Mind
- Date: 2004
- Subjects: Johannesburg Stock Exchange , Stocks -- Prices -- South Africa , Stock exchanges -- South Africa
- Language: English
- Type: Thesis , Masters , MCom
- Identifier: vital:1027 , http://hdl.handle.net/10962/d1002762 , Johannesburg Stock Exchange , Stocks -- Prices -- South Africa , Stock exchanges -- South Africa
- Description: While the Efficient Market Hypothesis (EHM) has been widely accepted as robust by many researchers in the field of capital markets, the hypothesis’ robustness has been under increased scrutiny and question lately. In the light of the concerns over the robustness of the EMH, the weak form efficiency of the JSE is tested. Stock returns used in the analysis were controlled for thin trading and it was discovered that once returns are controlled for thin trading, they are independent of each other across time. Some of the previous studies found the JSE to be inefficient in the weak form but this research found that the JSE is efficient in the weak form. A comparison is also made between the JSE and four other African stock markets and the JSE is found to be more efficient than the other markets. The developments on the JSE, which have improved information dissemination as well as the efficiency of trading, contributed to the improvement of the JSE’s efficiency. The improvement in operational efficiency and turnover from the late 1990s has also made a major contribution to the improvement in the weak form efficiency of the JSE. Theory proposes that if markets are efficient then professional investment management is of little value if any; hence the position of professional investment managers in efficient markets is investigated. Although the JSE is found to be efficient, at least in the weak form, it is argued that achieving efficiency does not necessarily make the investment manager’s role obsolete. Investment managers are needed even when the market can be proved to be efficient.
- Full Text:
- Date Issued: 2004
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