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Aspects of capital allocation

- Sonnekus, Hélène

Authors: Sonnekus, Hélène
Date: 2013-07-29
Subjects: Financial risk management , Asset allocation , Risk - Measurement , Portfolio management
Type: Thesis
Identifier: uj:7703 , http://hdl.handle.net/10210/8569
Description: M.Sc. (Statistics) , Most people in the world rely on a well-functioning and stable financial system. Problems experienced by financial institutions, such as too little liquidity or large amounts of bad debt, can easily influence companies and individuals, creating a chain reaction comparable to an avalanche. Financial institutions are faced with a very difficult constrained optimization problem - generating as much profit as possible while staying in business by limiting the amount of risk taken.
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Dynamic portfolio insurance and tactical asset allocation on the JSE

- Mngomezulu, Zwelakhe Sizwe

Authors: Mngomezulu, Zwelakhe Sizwe
Date: 2016
Subjects: Portfolio management , Asset allocation , Financial risk management , Options (Finance) - Prices - Mathematical models
Language: English
Type: Masters (Thesis)
Identifier: http://hdl.handle.net/10210/245956 , uj:25487
Description: M.Com. (Financial Economics) , Abstract: The pressing question on the minds of academics and investment professionals is whether portfolio managers can evidently protect investors’ capital during a period of economic downturn and provide superior returns with a minimum level of risk. This study attempts to answer this question by evaluating the performance of portfolio insurance methods using different asset classes traded on the local Johannesburg Stock Exchange and other global markets. The chosen data period for evaluation starts from 02 June 2004 to 31 December 2013. The study compares insured portfolios (made up of two methods: the Option-Based Portfolio Insurance and the Constant Proportion Portfolio Insurance) with uninsured portfolios made of these asset classes in order to demonstrate the benefit of portfolio insurance in protecting investors’ capital during both bull and bear markets. The study makes use of different asset allocation approaches including buy and hold, risk parity, minimum variance, and momentum in order to build an optimal uninsured portfolio. The results of the study show that the minimum variance approach of the Constant Proportion Portfolio Insurance strategy with a static multiplier of m=2 consistently outperforms uninsured and the Option-Based Portfolio Insurance portfolios. It is argued that this outperformance might be due to holding risky assets with lower volatility. Furthermore, when a dynamic multiplier is used, it was found that the risk parity approach for the Constant Proportion Portfolio Insurance results in the best-performing asset allocation method due to its lower downside deviation, higher Calmar ratio and fewer months to recover from a maximum drawdown. Both the static and dynamic Constant Proportion Portfolio Insurance strategy methods provided 100% protection of investors’ capital even during the 2008-2009 Global Financial Crisis. In contrast with the Constant Proportion Portfolio Insurance strategy, it was found that an Option-Based Portfolio Insurance strategy with the buy and hold asset allocation approach fails to provide maximum protection for investors’ capital during periods of financial crises, since it lost 9, 45% in 2008. Hence, the Option-Based Portfolio Insurance portfolios (insured) with a buy and hold approach underperform uninsured portfolios.
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Empirical evaluation of existing backtesting techniques for market risk models

- Sangweni, Xolile Zodwa

Authors: Sangweni, Xolile Zodwa
Date: 2019
Subjects: Technical analysis (Investment analysis) , Financial risk management
Language: English
Type: Masters (Thesis)
Identifier: http://hdl.handle.net/10210/403022 , uj:33753
Description: Abstract : This study investigates the performance of different backtesting techniques at evaluating market risk models with different conditional distributions. The study classifies existing backtesting techniques into two groups: Traditional backtesting techniques (Independence, unconditional Test, Conditional Coverage Test) that look only at the likelihood of the occurrence of a violation; and Modern backtesting techniques (Duration-Based Test, Dynamic Quantile Test, Dynamic Binary Test) that look either at the time elapsed between two consecutive violations and the relationship between violations and past violations. To achieve this, the study builds different types of conditional and unconditional market risk models. Unconditional market risk models include the historical simulation and variance covariance methods. The conditional market risk models are built by making use of eGARCH processes with different types of conditional distribution (asymmetric and extreme value distributions). The empirical analysis is based on daily return series of the following stock markets obtained from Bloomberg: - S&P500, FTSE 100, Africa All Share Index, and Nikkei 225. The sample period spans from 2006/01/02 to 2018/09/10. This sample period is then divided into two overlapping subsamples representing financial crisis, and tranquil period respectively. The results suggest that traditional backtesting techniques perform better at evaluating the different types of market risk models for both financial crisis and tranquil periods. However, the modern backtesting techniques perform well during a financial crisis and give misleading results during tranquil period. The finding of this study suggest that for an out-sample data of 250 days1, the best backtesting techniques to evaluate a model is the traditional backtesting techniques. Given the findings of this study, regulators and other decision makers can inform financial institutions operating in their respective jurisdictions to be cautious when using modern backtesting techniques in the process of evaluating market risk models for the computation of the regulatory minimum capital requirement. , M.Com. (Financial Economics)
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Enterprise risk management as a business enabler

- Du Plessis, Julian Lesley Nebreska

Authors: Du Plessis, Julian Lesley Nebreska
Date: 2012-06-05
Subjects: Enterprise risk management , Risk management , First National Bank of Southern Africa , Financial risk management
Type: Thesis
Identifier: uj:2424 , http://hdl.handle.net/10210/4884
Description: M.Phil. , The premise of this research study was to study the phenomenon of Enterprise Risk Management (ERM) in order to understand the processes and practices of risk management within First National Bank (FNB). Risk management became a favourite topic for discussion in the aftermath of the Global Financial Crisis (GFC). Some analysts, chief financial officers and observers have noted that risk management is to blame for the economic recession and myriad of bank failures that ensue. However, the intention of this research study was not to analyse the GFC or to devote itself entirely to defend risk management and risk managers.
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IT risk management disclosure in the integrated reports of the Top 40 listed companies on the JSE Limited

- Hohls-du Preez, Covanni

Authors: Hohls-du Preez, Covanni
Date: 2016
Subjects: Information technology - Risk management , Information technology - Security measures , Financial risk management , Auditing - Data processing
Language: English
Type: Masters (Thesis)
Identifier: http://hdl.handle.net/10210/245826 , uj:25469
Description: M.Com. (Computer Auditing) , Abstract: Information Technology (IT) has become an integral part of virtually all modern day organisations. The advent of IT has given rise to numerous benefits which increase productivity and efficiency in the workplace, however, IT also brings with it significant risks that can have an impact on an organisation’s ability to function as a going concern. Organisations, especially those listed on the Johannesburg Stock Exchange (JSE), are required to submit an Integrated Report (IR) on an annual basis in which they indicate how they used the resources at their disposal to create value for the organisation and its stakeholders during the year under review. The IR is also a forward-looking document, as opposed to the traditional, backward-looking reports. The purpose of this study is to analyse the Integrated Reports of the Top 40 listed organisations on the JSE and determine the extent to which IT risks are disclosed in their IR and whether the way these risks are managed is also included in the IR as required by the IR Framework. This is done by means of an empirical study consisting of a content analysis of the IRs of the Top 40 listed companies on the JSE. The results of the analysis indicate that more than half of the companies in the sample included IT risk as part of their material risks and outlined appropriate and detailed processes that are followed by the company to manage those IT risks.
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Risk-return nexus in a GARCH-M framework : empirical evidence from the South African stock market

- Morahanye, Hlompho

Authors: Morahanye, Hlompho
Date: 2019
Subjects: Financial risk management , Johannesburg Stock Exchange , GARCH model
Language: English
Type: Masters (Thesis)
Identifier: http://hdl.handle.net/10210/414319 , uj:34939
Description: Abstract: This paper studies the association between risk and returns in the Johannesburg Stock Exchange. In particular, the study is interested in modelling this relationship during periods of high volatility with special reference to the 2007-2009 financial crises. The objective is to highlight the effect that a high volatility period might have on the relationship. To achieve this objective, daily data for the market index, JSE Top 40 and the two JSE sectoral indices for the period 1/1/2004 to 3/5/2017 are used. The GARCHM, E-GARCH-M and TARCH-M models and the same aforementioned models with dummy variables to account for two volatility regimes are used. The CAPM prediction that the expected return on a stock above the risk-free rate is positive is not supported by the study. The tests conducted to examine the relationship observed that the risk premiums were either positive but insignificant, or negative and significant, which is inconsistent with the theory. The observed outcomes indicate that the risk premium is not necessarily positive, even after accounting for different regimes. These results are generally in line with observations made by other authors who investigated the relationship within the South African context. The findings of this paper are useful in financial decision-making, such as in providing investors with information on which sectors to invest in based on their risk appetite, as well as providing information regarding the performance of the different stocks in the market in terms of risk and return. , M.Com. (Financial Economics)
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The effect of systematic risk factors on stock returns in a developing country : the case of South Africa

- Chawana, Munyaradzi

Authors: Chawana, Munyaradzi
Date: 2012-06-07
Subjects: Stocks , Stocks - Rate of return , Financial risk management
Type: Mini-Dissertation
Identifier: uj:8693 , http://hdl.handle.net/10210/5047
Description: M. Comm. , For many years in finance literature and practice, the Capital Asset Pricing Model (CAPM) has been recognised as the major framework for analysing the cross-sectional variation in expected asset returns. The CAPM is structured on the belief that stock returns are influenced by just one risk aspect of the macro economy, market fluctuation. With the market portfolio at the centre of the CAPM, the critical point in employing the model is the estimation of the true market portfolio. Thus, an imperfect approximation of the market portfolio leads to an imperfect measure of the risk-return relationship. With this impediment of the CAPM, the Arbitrage Pricing Theory (APT) of Ross (1976) has been proposed as an alternative to the CAPM. Based on the premise that there are multiple factors that represent the fundamental risks in the economy and involving no market portfolio, the APT has attracted a lot of attention in finance literature. However, in contrast to the voluminous research in developed markets relating stock returns to more than one source of systematic risk factors (multifactor models), research in emerging markets is scant. This study, conducted using an APT framework, investigates from a developing market perspective the relationship between stock returns of JSE Limited-listed companies and pre- specified macroeconomic variables of: economic activity, inflation, term structure and oil prices. The analysis is conducted with monthly data from the South African stock market and aggregate economy over the period January 2000 to December 2009. Following Chen, Roll and Ross (1986), the study utilises the Fama and MacBeth (1973) two step procedure. Within the scope of the methodology and data employed, the results of this study provide a different perspective for South Africa from that found for the US by Chen et al. (1986). Consistent with Martinez and Rubio (1989) for Spain and Poon and Taylor (1991) for the UK, the findings of this study suggest that none of the risk factors found to be significant in Chen et al. (1986) are priced in the South African case.
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The impact of dividend policy on share price volatility of JSE ALTX listed companies

- Pelcher, Lydia

Authors: Pelcher, Lydia
Date: 2017
Subjects: Stocks - Prices , Dividends , JSE Limited , Johannesburg Stock Exchange , Corporations - Finance , Financial risk management
Language: English
Type: Masters (Thesis)
Identifier: http://hdl.handle.net/10210/245925 , uj:25483
Description: M.Com. (Financial Management) , Abstract: Share prices and dividends were considered as important factors in creating and increasing shareholders’ wealth. In some theories it was indicated that the existence of a relationship between share prices and dividends could be questioned. More important for companies and investors was the determination of a relationship between share price volatility and dividends. If such a relationship existed, companies could structure their dividend policy decisions to attain minimum share price volatility in order to attract maximum investor interest. This was especially important to small and medium-sized companies finding themselves in the early growth phase. The aim of this study was to determine whether a relationship existed between share price volatility and dividend policy for companies listed on the Alternative Exchange (AltX) on the Johannesburg Stock Exchange Limited (JSE Ltd). Dividend policy was measured through dividend yield and the dividend pay-out ratio. Share price volatility was regressed against dividend yield and the dividend pay-out ratio using panel data regression analysis to achieve this aim. Share price volatility was found to have a statistically significant and negative relationship with dividend yield, and a statistically insignificant relationship with the dividend pay-out ratio. The results indicated that a company could possibly reduce the share price volatility by using the dividend policy by declaring dividends, although the amount of dividends in relation to earnings were of little importance to investors of small to medium-sized companies. The results of this study therefore provided information that such companies could use to structure their dividend policy in such a way that share price volatility risk would be minimised, which in turn would promote optimum growth for investors.
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