Herding behaviour in financial markets : empirical evidence from the Johannesburg Stock Exchange
- Ababio, Kofi A., Muteba Mwamba, John W.
- Authors: Ababio, Kofi A. , Muteba Mwamba, John W.
- Date: 2017
- Subjects: Behavioural finance , Herding behaviour , Johannesburg Stock Exchange
- Language: English
- Type: Article
- Identifier: http://hdl.handle.net/10210/240292 , uj:24719 , Citation: Ababio, K.A. & Muteba Mwamba, J.W. 2017. Herding behaviour in financial markets : empirical evidence from the Johannesburg Stock Exchange.
- Description: Abstract: Please refer to full text to view abstract
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- Authors: Ababio, Kofi A. , Muteba Mwamba, John W.
- Date: 2017
- Subjects: Behavioural finance , Herding behaviour , Johannesburg Stock Exchange
- Language: English
- Type: Article
- Identifier: http://hdl.handle.net/10210/240292 , uj:24719 , Citation: Ababio, K.A. & Muteba Mwamba, J.W. 2017. Herding behaviour in financial markets : empirical evidence from the Johannesburg Stock Exchange.
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Investors’ trading behaviour, stock selection and portfolio optimisation
- Authors: Ababio, Kofi Agyarko
- Date: 2018
- Subjects: Stock exchanges - South Africa - Johannesburg , Johannesburg Stock Exchange
- Language: English
- Type: Doctoral (Thesis)
- Identifier: http://hdl.handle.net/10210/283003 , uj:30507
- Description: Abstract: The thesis investigates the existence of herding behaviour in the Johannesburg Stock Exchange. In addition, adopting a descriptive theory of decision-making, the thesis explores the possibility of adding value to investors‟ portfolio by investing solely in stocks driven by human mentality and psychology. Data were obtained from the INET BFA Expert - Iress Database and comprised the universe of listed stocks in the financial industry of the Johannesburg Stock Exchange spanning the period from January 2010 to October 2016. The thesis is organised in two phases and contributes to the field of financial economics specifically behavioural economics and portfolio management and bridges the gap between the two fields. The thesis offers an intuitive and a psychologically corroborated descriptive investment strategy capable of adding value to investors‟ portfolio. While the first phase of the thesis highlights and describes key investor behaviours which are largely at variance with the rational assumption documented in the behavioural economics literature, the second phase incorporates investors‟ psychology in the stock selection and portfolio optimisation. The two initial empirical chapters (i.e. Chapter 3 & Chapter 4) were primarily devoted to searching evidence of herding behaviour in the Johannesburg Stock Exchange1. Three advanced methodologies were adopted in testing evidence of herding behaviour. Chapter 5, the last empirical chapter adopts a descriptive decision theory, the Cumulative Prospect Theory and the Mean-Variance portfolio optimisation criterion to optimise and evaluate classified and formulated portfolios based on the Cumulative Prospect Theory. Following Chapter 2 the literature review, Chapter 3 tested evidence of herding behaviour both at the industry and the sectoral levels adopting the quantile regression model. At the sectoral level, herding behaviour showed asymmetry. While investors in the banking sector exhibited the herding behaviour during the bear market phase, in the real estate sector, investors suffered from the behavioural bias during the bull market phase. However, in the entire financial industry, the results showed evidence of herding behaviour during the bull market phase only. Likewise, Chapter 4 compared results of two conventional approaches with the Bayesian model in testing evidence of herding behaviour. Apart from the insurance sector, the results showed evidence of herding behaviour in the rest of the sectors during the bear and the bull market phases using the conventional approaches. Similarly, using the conventional approaches and the Bayesian models, investors in the entire financial industry showed evidence of herding behaviour. Portfolio optimisation results in the last empirical chapter consistently showed that stocks with extremely lower Cumulative Prospect Theory values outperformed stocks with extremely higher Cumulative Prospect Theory values. The results further established the superiority of the Cumulative Prospect Theory as an empirically corroborated theory of decision-making with rich psychological content. , Ph.D. (Economics)
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- Authors: Ababio, Kofi Agyarko
- Date: 2018
- Subjects: Stock exchanges - South Africa - Johannesburg , Johannesburg Stock Exchange
- Language: English
- Type: Doctoral (Thesis)
- Identifier: http://hdl.handle.net/10210/283003 , uj:30507
- Description: Abstract: The thesis investigates the existence of herding behaviour in the Johannesburg Stock Exchange. In addition, adopting a descriptive theory of decision-making, the thesis explores the possibility of adding value to investors‟ portfolio by investing solely in stocks driven by human mentality and psychology. Data were obtained from the INET BFA Expert - Iress Database and comprised the universe of listed stocks in the financial industry of the Johannesburg Stock Exchange spanning the period from January 2010 to October 2016. The thesis is organised in two phases and contributes to the field of financial economics specifically behavioural economics and portfolio management and bridges the gap between the two fields. The thesis offers an intuitive and a psychologically corroborated descriptive investment strategy capable of adding value to investors‟ portfolio. While the first phase of the thesis highlights and describes key investor behaviours which are largely at variance with the rational assumption documented in the behavioural economics literature, the second phase incorporates investors‟ psychology in the stock selection and portfolio optimisation. The two initial empirical chapters (i.e. Chapter 3 & Chapter 4) were primarily devoted to searching evidence of herding behaviour in the Johannesburg Stock Exchange1. Three advanced methodologies were adopted in testing evidence of herding behaviour. Chapter 5, the last empirical chapter adopts a descriptive decision theory, the Cumulative Prospect Theory and the Mean-Variance portfolio optimisation criterion to optimise and evaluate classified and formulated portfolios based on the Cumulative Prospect Theory. Following Chapter 2 the literature review, Chapter 3 tested evidence of herding behaviour both at the industry and the sectoral levels adopting the quantile regression model. At the sectoral level, herding behaviour showed asymmetry. While investors in the banking sector exhibited the herding behaviour during the bear market phase, in the real estate sector, investors suffered from the behavioural bias during the bull market phase. However, in the entire financial industry, the results showed evidence of herding behaviour during the bull market phase only. Likewise, Chapter 4 compared results of two conventional approaches with the Bayesian model in testing evidence of herding behaviour. Apart from the insurance sector, the results showed evidence of herding behaviour in the rest of the sectors during the bear and the bull market phases using the conventional approaches. Similarly, using the conventional approaches and the Bayesian models, investors in the entire financial industry showed evidence of herding behaviour. Portfolio optimisation results in the last empirical chapter consistently showed that stocks with extremely lower Cumulative Prospect Theory values outperformed stocks with extremely higher Cumulative Prospect Theory values. The results further established the superiority of the Cumulative Prospect Theory as an empirically corroborated theory of decision-making with rich psychological content. , Ph.D. (Economics)
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The effectiveness of technical investment strategies for individual investors on the JSE Limited
- Authors: Baard, Vaughan
- Date: 2012-06-07
- Subjects: Individual investors , Investment strategy , Moving average technical trading rules , Johannesburg Stock Exchange
- Type: Mini-Dissertation
- Identifier: uj:8692 , http://hdl.handle.net/10210/5046
- Description: M. Comm. , This research considers if it is possible for an individual investor investing on the JSE to achieve returns greater than that of the market, represented by the Satrix 40 as a market proxy, by implementing an active investment strategy based on moving average technical trading rules. The moving average technical trading rules which were applied in the research were based on a previous study presented by Brock et al. (1992), but were applied in a South African context. Of the twenty-six different trading rules tested as part of the study, eight were found to achieve greater overall returns than the Satrix 40 over the sample period. The results of the study therefore suggest that it is possible for an investor to better the market returns, represented by the Satrix 40 as a market proxy, using certain moving average technical trading rules.
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- Authors: Baard, Vaughan
- Date: 2012-06-07
- Subjects: Individual investors , Investment strategy , Moving average technical trading rules , Johannesburg Stock Exchange
- Type: Mini-Dissertation
- Identifier: uj:8692 , http://hdl.handle.net/10210/5046
- Description: M. Comm. , This research considers if it is possible for an individual investor investing on the JSE to achieve returns greater than that of the market, represented by the Satrix 40 as a market proxy, by implementing an active investment strategy based on moving average technical trading rules. The moving average technical trading rules which were applied in the research were based on a previous study presented by Brock et al. (1992), but were applied in a South African context. Of the twenty-six different trading rules tested as part of the study, eight were found to achieve greater overall returns than the Satrix 40 over the sample period. The results of the study therefore suggest that it is possible for an investor to better the market returns, represented by the Satrix 40 as a market proxy, using certain moving average technical trading rules.
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Capital raising options of JSE listed companies across the business cycle
- Authors: Botha, Jacques
- Date: 2017
- Subjects: Johannesburg Stock Exchange , Business cycles - South Africa , Debt - South Africa , Equity - South Africa , Corporations - South Africa
- Language: English
- Type: Masters (Thesis)
- Identifier: http://hdl.handle.net/10210/271811 , uj:28916
- Description: M.Com. (Financial Management) , Abstract: Economic theory suggests that macroeconomic conditions affect an Issuers ability to issue debt or equity capital securities during certain phases of the business cycle. The two main arguments for this are the demand and supply of capital. The demand for capital argument is associated with an increase in equity securities relative to debt during the expansion phase of the business cycle, due to information asymmetries. The supply of capital argument, on the other hand, affects both the availability of funds and shifts investors’ preferences towards safer securities such as debt during tough economic conditions. This study evaluates both the demand and supply of capital for Issuers listed on the JSE by investigating the issuing debt or equity securities to raise capital across the South African business cycle. The findings indicate that a greater number of equity issuances were experienced during the recession phase of the business cycle. The results further highlight that security issuance patterns are not consistent with the flight-to-quality theory, as the shift of investors’ preferences towards safer securities during the deteriorating macroeconomic conditions is not affected.
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- Authors: Botha, Jacques
- Date: 2017
- Subjects: Johannesburg Stock Exchange , Business cycles - South Africa , Debt - South Africa , Equity - South Africa , Corporations - South Africa
- Language: English
- Type: Masters (Thesis)
- Identifier: http://hdl.handle.net/10210/271811 , uj:28916
- Description: M.Com. (Financial Management) , Abstract: Economic theory suggests that macroeconomic conditions affect an Issuers ability to issue debt or equity capital securities during certain phases of the business cycle. The two main arguments for this are the demand and supply of capital. The demand for capital argument is associated with an increase in equity securities relative to debt during the expansion phase of the business cycle, due to information asymmetries. The supply of capital argument, on the other hand, affects both the availability of funds and shifts investors’ preferences towards safer securities such as debt during tough economic conditions. This study evaluates both the demand and supply of capital for Issuers listed on the JSE by investigating the issuing debt or equity securities to raise capital across the South African business cycle. The findings indicate that a greater number of equity issuances were experienced during the recession phase of the business cycle. The results further highlight that security issuance patterns are not consistent with the flight-to-quality theory, as the shift of investors’ preferences towards safer securities during the deteriorating macroeconomic conditions is not affected.
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A share trading strategy : the JSE using 50 and 200 day moving averages
- Authors: Burlo, Adrian Vincent
- Date: 2012-08-27
- Subjects: Johannesburg Stock Exchange , Stock price forecasting
- Type: Thesis
- Identifier: uj:3170 , http://hdl.handle.net/10210/6586
- Description: M.B.A , The aim of this dissertation is to determine if there is any evidence that supports a "50" and a "200" day moving average share trading strategy to select, buy and sell shares quoted on the Johannesburg Securities Exchange (JSE) Main Board, in order to determine if a "50" and a "200" day moving average share trading strategy will be appropriate to use, in order to make share trading profits in excess of the return generated by the JSE Overall Index. 1.4 0 .ACTIFVES o To evaluate fundamental analysis in respect of the quality of information (mainly at a company level) available to investors as the basis on which decisions to buy and sell shares are made. o To evaluate previous research undertaken in technical analysis with respect to the use and application of moving averages as a trading strategy in making share selections as well as buy and sell decisions. 14 Analyse historic price data on individual, randomly selected shares from the total population of all main board (1.6.5) listed shares quoted on the Johannesburg
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- Authors: Burlo, Adrian Vincent
- Date: 2012-08-27
- Subjects: Johannesburg Stock Exchange , Stock price forecasting
- Type: Thesis
- Identifier: uj:3170 , http://hdl.handle.net/10210/6586
- Description: M.B.A , The aim of this dissertation is to determine if there is any evidence that supports a "50" and a "200" day moving average share trading strategy to select, buy and sell shares quoted on the Johannesburg Securities Exchange (JSE) Main Board, in order to determine if a "50" and a "200" day moving average share trading strategy will be appropriate to use, in order to make share trading profits in excess of the return generated by the JSE Overall Index. 1.4 0 .ACTIFVES o To evaluate fundamental analysis in respect of the quality of information (mainly at a company level) available to investors as the basis on which decisions to buy and sell shares are made. o To evaluate previous research undertaken in technical analysis with respect to the use and application of moving averages as a trading strategy in making share selections as well as buy and sell decisions. 14 Analyse historic price data on individual, randomly selected shares from the total population of all main board (1.6.5) listed shares quoted on the Johannesburg
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Effects of final dividend announcements on share prices of companies of the FTSE/JSE Top 40 index
- Authors: Coetzee, Alisha
- Date: 2014-10-07
- Subjects: Dividends , Johannesburg Stock Exchange , Stocks - Prices
- Type: Thesis
- Identifier: uj:12470 , http://hdl.handle.net/10210/12268
- Description: M.Com. (Investment Management) , The study investigates the effects of final dividend announcements on the share prices of the FTSE/JSE Top 40 Index for the period 2003-2012. A classical event study methodology was applied to test the data. Over the sample period the Abnormal Returns (AR), Average Abnormal Returns (AAR) and Cumulative Average Abnormal Returns (CAAR) were calculated. The final sample consisted of 13 companies that included 144 dividend announcement events. The results indicated that although dividend announcements seem to have a positive effect on share prices, the returns yielded from these effects are not significant and close to zero. Evidence relating to the dividend signalling hypothesis was also present in the South African market.
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- Authors: Coetzee, Alisha
- Date: 2014-10-07
- Subjects: Dividends , Johannesburg Stock Exchange , Stocks - Prices
- Type: Thesis
- Identifier: uj:12470 , http://hdl.handle.net/10210/12268
- Description: M.Com. (Investment Management) , The study investigates the effects of final dividend announcements on the share prices of the FTSE/JSE Top 40 Index for the period 2003-2012. A classical event study methodology was applied to test the data. Over the sample period the Abnormal Returns (AR), Average Abnormal Returns (AAR) and Cumulative Average Abnormal Returns (CAAR) were calculated. The final sample consisted of 13 companies that included 144 dividend announcement events. The results indicated that although dividend announcements seem to have a positive effect on share prices, the returns yielded from these effects are not significant and close to zero. Evidence relating to the dividend signalling hypothesis was also present in the South African market.
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The impact of capital structure on financial performance of the financial services sector on the JSE
- Authors: Du Plessis, Darius
- Date: 2018
- Subjects: Capital investments , Corporations - Finance , Johannesburg Stock Exchange
- Language: English
- Type: Masters (Thesis)
- Identifier: http://hdl.handle.net/10210/295810 , uj:32220
- Description: Abstract: The focus of this paper is to determine the impact of capital structure on the performance of companies listed in the financial sector of the Johannesburg Stock Exchange (JSE). Determining if capital structure influences the profitability of this sector is the first step in defining the optimal capital structure of companies of this sector. If a model of the optimal structure can be determined, supported by relevant capital structure theories, best practice would dictate acceptance and use of such a model. As the financial sector acts as an intermediary for the economy of a country, it is one of the fundamental elements that supports economic growth. If this sector’s capacity and capabilities can be increased, it will lead to an improvement in the performance of this sector, which will thus be better suited to serve the needs of the country’s economy. There are different capital structure theories that could hold sway in the financial sector in a South African context; these theories are the underlying theoretical framework on which this study is based. A quantitative approach, in the form of a Panel Data Analysis, is employed. This makes use of proxy variables that represent profitability (dependent variables) and capital structure (independent variables). It was found that the major influencer of profitability of companies on the financial sector was the total debt that is part of their capital structure as well as their overall size. Although this reflects elements that are applicable within several different capital structure theories, it is the first time that these elements have been discussed in the financial sector context, as a whole, in South Africa. These variables are thus key elements in determining optimal capital structure for South African financial companies. , M.Com. (Finance)
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The impact of capital structure on financial performance of the financial services sector on the JSE
- Authors: Du Plessis, Darius
- Date: 2018
- Subjects: Capital investments , Corporations - Finance , Johannesburg Stock Exchange
- Language: English
- Type: Masters (Thesis)
- Identifier: http://hdl.handle.net/10210/295810 , uj:32220
- Description: Abstract: The focus of this paper is to determine the impact of capital structure on the performance of companies listed in the financial sector of the Johannesburg Stock Exchange (JSE). Determining if capital structure influences the profitability of this sector is the first step in defining the optimal capital structure of companies of this sector. If a model of the optimal structure can be determined, supported by relevant capital structure theories, best practice would dictate acceptance and use of such a model. As the financial sector acts as an intermediary for the economy of a country, it is one of the fundamental elements that supports economic growth. If this sector’s capacity and capabilities can be increased, it will lead to an improvement in the performance of this sector, which will thus be better suited to serve the needs of the country’s economy. There are different capital structure theories that could hold sway in the financial sector in a South African context; these theories are the underlying theoretical framework on which this study is based. A quantitative approach, in the form of a Panel Data Analysis, is employed. This makes use of proxy variables that represent profitability (dependent variables) and capital structure (independent variables). It was found that the major influencer of profitability of companies on the financial sector was the total debt that is part of their capital structure as well as their overall size. Although this reflects elements that are applicable within several different capital structure theories, it is the first time that these elements have been discussed in the financial sector context, as a whole, in South Africa. These variables are thus key elements in determining optimal capital structure for South African financial companies. , M.Com. (Finance)
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Determinants of dividend payout for the financial and consumer goods sectors on the JSE
- Authors: Fusire, Tafadzwa Oswell
- Date: 2017
- Subjects: Dividends - South Africa , Profit , Johannesburg Stock Exchange , Financial services industry - South Africa
- Language: English
- Type: Masters (Thesis)
- Identifier: http://hdl.handle.net/10210/272714 , uj:29041
- Description: M.Com. (Financial Management) , Abstract: This study seeks to develop a better understanding of the determinants of cash dividend payout in South Africa. Latest trends in the Sub-Saharan region indicate that the agency cost and free cashflow theories best explain the dividend policies in the region. The objective of this study is to test the applicability of these theories for a South African context together with an examination of the possible impact of the macroeconomic factors, taxation and profitability on the dividend policies. The focus is on firms in the consumer goods sector and the financial sector on the Johannesburg Stock Exchange over a period from 1988 to 2016 to capture the long run relationships. Using Panel regression, the results suggest that there is a significant difference in the determinants of dividend payout between the two sectors. The agency cost and free cashflow theories explain the dividend payout for the financial sector where leverage, dividend tax, previous dividend and current profitability explain the dividend decision for the consumer goods sector. GDP per capita is a common determinant for both sectors though in inverse relationships. The results mirror those found in other developing economies and the study has contributed to the growing body of knowledge on the determinants of cash dividend payout in South Africa.
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- Authors: Fusire, Tafadzwa Oswell
- Date: 2017
- Subjects: Dividends - South Africa , Profit , Johannesburg Stock Exchange , Financial services industry - South Africa
- Language: English
- Type: Masters (Thesis)
- Identifier: http://hdl.handle.net/10210/272714 , uj:29041
- Description: M.Com. (Financial Management) , Abstract: This study seeks to develop a better understanding of the determinants of cash dividend payout in South Africa. Latest trends in the Sub-Saharan region indicate that the agency cost and free cashflow theories best explain the dividend policies in the region. The objective of this study is to test the applicability of these theories for a South African context together with an examination of the possible impact of the macroeconomic factors, taxation and profitability on the dividend policies. The focus is on firms in the consumer goods sector and the financial sector on the Johannesburg Stock Exchange over a period from 1988 to 2016 to capture the long run relationships. Using Panel regression, the results suggest that there is a significant difference in the determinants of dividend payout between the two sectors. The agency cost and free cashflow theories explain the dividend payout for the financial sector where leverage, dividend tax, previous dividend and current profitability explain the dividend decision for the consumer goods sector. GDP per capita is a common determinant for both sectors though in inverse relationships. The results mirror those found in other developing economies and the study has contributed to the growing body of knowledge on the determinants of cash dividend payout in South Africa.
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The relationship between corporate governance board characteristics and financial performance of South African JSE listed companies in the construction and building materials sector
- Authors: Jingura, Netsayi Landie
- Date: 2019
- Subjects: Corporate governance , Corporations - Finance , Johannesburg Stock Exchange
- Language: English
- Type: Masters (Thesis)
- Identifier: http://hdl.handle.net/10210/403161 , uj:33770
- Description: Abstract : The relationship between corporate performance and governance practices goes back for centuries yet is still relevant today, in the modern corporate environment. While corporate governance is argued to be an agency cost, as it curbs managers’ self-interest, it is believed to increase company performance as it inspires group effort from all stakeholders. Corporate governance describes the mechanisms in place to ensure that management is taking appropriate steps, policies and procedures to protect every stakeholder’s interest in the company. The study is an investigation on the relationship between corporate governance board of directors and company performance. Board of directors’ characteristics were represented by board size, board independence, Chief Executive Officer (CEO) tenure, CEO compensation and CEO duality while company performance measures were represented by Return on Equity (ROE), Return on Assets (ROA) and Net Profit Margin (NPM). The study used panel regression analysis to estimate a sample of 12 South African public companies in the construction and building materials sector of the Johannesburg Stock Exchange for the period of 2011 to 2016. The size and leverage of a company were considered as control variables. The findings indicated no significant relationship between board independence, board size and CEO duality but did find a direct significant relationship between CEO tenure and CEO remuneration and company performance. The research also found a statistically significant inverse relationship between leverage and company size and performance of the company. This research is a useful aid to the comprehension of board characteristics affecting company performance in South Africa and improving corporate governance principles to eliminate corporate scandals that are crippling economies globally. , M.Com. (Finance)
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- Authors: Jingura, Netsayi Landie
- Date: 2019
- Subjects: Corporate governance , Corporations - Finance , Johannesburg Stock Exchange
- Language: English
- Type: Masters (Thesis)
- Identifier: http://hdl.handle.net/10210/403161 , uj:33770
- Description: Abstract : The relationship between corporate performance and governance practices goes back for centuries yet is still relevant today, in the modern corporate environment. While corporate governance is argued to be an agency cost, as it curbs managers’ self-interest, it is believed to increase company performance as it inspires group effort from all stakeholders. Corporate governance describes the mechanisms in place to ensure that management is taking appropriate steps, policies and procedures to protect every stakeholder’s interest in the company. The study is an investigation on the relationship between corporate governance board of directors and company performance. Board of directors’ characteristics were represented by board size, board independence, Chief Executive Officer (CEO) tenure, CEO compensation and CEO duality while company performance measures were represented by Return on Equity (ROE), Return on Assets (ROA) and Net Profit Margin (NPM). The study used panel regression analysis to estimate a sample of 12 South African public companies in the construction and building materials sector of the Johannesburg Stock Exchange for the period of 2011 to 2016. The size and leverage of a company were considered as control variables. The findings indicated no significant relationship between board independence, board size and CEO duality but did find a direct significant relationship between CEO tenure and CEO remuneration and company performance. The research also found a statistically significant inverse relationship between leverage and company size and performance of the company. This research is a useful aid to the comprehension of board characteristics affecting company performance in South Africa and improving corporate governance principles to eliminate corporate scandals that are crippling economies globally. , M.Com. (Finance)
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Empirical evidence of a systematic tail risk premium in the Johannesburg Stock Exchange
- Authors: Kouadio, Jean Joel Arnaud
- Date: 2020
- Subjects: Johannesburg Stock Exchange , Copulas (Mathematical statistics) , Extreme value theory , Financial risk
- Language: English
- Type: Masters (Thesis)
- Identifier: http://hdl.handle.net/10210/451433 , uj:39777
- Description: Abstract: This study defines systematic tail risk as a stock’s exposure to market tail events and assesses the impact of it on the cross section of returns from the Johannesburg Stock Exchange (JSE). To determine the extent to which systematic tail risk explains the cross section of returns in the JSE, the study estimates systematic tail risk by combining the statistical concepts of extreme value theory (EVT) and copula. Specifically, the study first characterizes stocks and market tail events under the Block model and subsequently proxies a stock’s systematic tail risk with parameter estimates of an extreme value copula fitted to the bivariate Generalized Extreme Value (GEV) distribution of stock and market tail events. Based on data on JSE All Share Index companies, provided by the JSE for the period of January 2002 through June 2018, results of the traditional asset pricing portfolios formation and crosssectional regressions show that the extreme value copula parameter adequately captures systematic tail risk in the JSE. More importantly, the results support the existence of a systematic tail risk premium in the JSE. Interestingly, the effect of systematic tail risk on the cross section of returns is time-varying and independent from that of risk measures such as beta and downside beta and firm characteristics such as book-to-market (BTM) ratio, size and past returns. In addition, the results provide evidence on the negative impact of the 2008 Global Financial Crisis on crash aversion in the JSE. The practical relevance of these results is of an utmost importance for both academics and finance professionals. The findings implicitly provide support for the downside risk framework as a legitimate perspective on investors’ perception of risk in equity markets and reveal a need to reconsider somehow disfavoured portfolio theories such as the safety-first criterion for asset pricing endeavours. , M.Com. (Financial Economics)
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- Authors: Kouadio, Jean Joel Arnaud
- Date: 2020
- Subjects: Johannesburg Stock Exchange , Copulas (Mathematical statistics) , Extreme value theory , Financial risk
- Language: English
- Type: Masters (Thesis)
- Identifier: http://hdl.handle.net/10210/451433 , uj:39777
- Description: Abstract: This study defines systematic tail risk as a stock’s exposure to market tail events and assesses the impact of it on the cross section of returns from the Johannesburg Stock Exchange (JSE). To determine the extent to which systematic tail risk explains the cross section of returns in the JSE, the study estimates systematic tail risk by combining the statistical concepts of extreme value theory (EVT) and copula. Specifically, the study first characterizes stocks and market tail events under the Block model and subsequently proxies a stock’s systematic tail risk with parameter estimates of an extreme value copula fitted to the bivariate Generalized Extreme Value (GEV) distribution of stock and market tail events. Based on data on JSE All Share Index companies, provided by the JSE for the period of January 2002 through June 2018, results of the traditional asset pricing portfolios formation and crosssectional regressions show that the extreme value copula parameter adequately captures systematic tail risk in the JSE. More importantly, the results support the existence of a systematic tail risk premium in the JSE. Interestingly, the effect of systematic tail risk on the cross section of returns is time-varying and independent from that of risk measures such as beta and downside beta and firm characteristics such as book-to-market (BTM) ratio, size and past returns. In addition, the results provide evidence on the negative impact of the 2008 Global Financial Crisis on crash aversion in the JSE. The practical relevance of these results is of an utmost importance for both academics and finance professionals. The findings implicitly provide support for the downside risk framework as a legitimate perspective on investors’ perception of risk in equity markets and reveal a need to reconsider somehow disfavoured portfolio theories such as the safety-first criterion for asset pricing endeavours. , M.Com. (Financial Economics)
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The impact of capital structure on the financial performance of listed South African construction companies
- Authors: Kurambwi, Louis
- Date: 2018
- Subjects: Construction industry - South Africa - Finance , Johannesburg Stock Exchange
- Language: English
- Type: Masters (Thesis)
- Identifier: http://hdl.handle.net/10210/403225 , uj:33778
- Description: Abstract : This study investigated the impact of capital structure on the financial performance of South African construction companies listed on the Johannesburg Stock Exchange (JSE). Short-term Debt to Total Assets Ratio (STDTA), Long-term Debt to Total Assets Ratio (LTDTA) and Interest Cover Ratio (ICR) were used as independent variables proxying capital structure whilst Return on Assets (ROA), Return on Equity (ROE) and Tobin’s Q (TOBIN) were used as dependent variables representing financial performance to determine the impact of capital structure on financial performance. The final sample consisted of nine companies in the South African construction sector that were listed on the JSE. Annual data for seven years from 2011 to 2017 was collected from the audited consolidated financial statements of these companies and was examined using a panel regression analysis. The Hausman test was conducted to select the final model between the fixed effects model and random effects model. Size in terms of sales growth was noted to have a positive impact on financial performance as represented by ROA, thus construction companies’ management ought to come up with strategies that improve sales. Both STDTA and LTDTA had no impact on TOBIN whilst ICR had no impact on the companies’ financial performance. However ROA and ROE were inversely related to both STDTA and LTDTA. The study indicates to stakeholders that debt needs to be managed properly since it has the power to adversely affect the company’s financial performance. The results of the study are therefore contrary to the trade-off theory that advocates the use of debt to enhance financial performance through tax deductions. The study contributes to existing literature on finance, especially in the context of African emerging economies such as South Africa. , M.Com. (Finance)
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- Authors: Kurambwi, Louis
- Date: 2018
- Subjects: Construction industry - South Africa - Finance , Johannesburg Stock Exchange
- Language: English
- Type: Masters (Thesis)
- Identifier: http://hdl.handle.net/10210/403225 , uj:33778
- Description: Abstract : This study investigated the impact of capital structure on the financial performance of South African construction companies listed on the Johannesburg Stock Exchange (JSE). Short-term Debt to Total Assets Ratio (STDTA), Long-term Debt to Total Assets Ratio (LTDTA) and Interest Cover Ratio (ICR) were used as independent variables proxying capital structure whilst Return on Assets (ROA), Return on Equity (ROE) and Tobin’s Q (TOBIN) were used as dependent variables representing financial performance to determine the impact of capital structure on financial performance. The final sample consisted of nine companies in the South African construction sector that were listed on the JSE. Annual data for seven years from 2011 to 2017 was collected from the audited consolidated financial statements of these companies and was examined using a panel regression analysis. The Hausman test was conducted to select the final model between the fixed effects model and random effects model. Size in terms of sales growth was noted to have a positive impact on financial performance as represented by ROA, thus construction companies’ management ought to come up with strategies that improve sales. Both STDTA and LTDTA had no impact on TOBIN whilst ICR had no impact on the companies’ financial performance. However ROA and ROE were inversely related to both STDTA and LTDTA. The study indicates to stakeholders that debt needs to be managed properly since it has the power to adversely affect the company’s financial performance. The results of the study are therefore contrary to the trade-off theory that advocates the use of debt to enhance financial performance through tax deductions. The study contributes to existing literature on finance, especially in the context of African emerging economies such as South Africa. , M.Com. (Finance)
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A quantitative analysis of economic indicators on the performance of the Johannesburg Stock Exchange Industrial Index
- Authors: Kussel, Craig Adam
- Date: 2012-08-28
- Subjects: Economic indicators - South Africa , Stock price indexes , Johannesburg Stock Exchange
- Type: Mini-Dissertation
- Identifier: uj:3327 , http://hdl.handle.net/10210/6729
- Description: M.Comm. , The aim of this study was to assess the effect that economic indicators have had on the performance of the industrial index of the Johannesburg Stock Exchange.This study was motivated as a result of the growth in participation on the JSE by local investors, both private individuals and through vehicles such as unit trusts and foreigners.The results of this participation have been twofold.Firstly, there has been an expansion in market participants research divisions in order to gain a windfall by predicting events ex-ante. Secondly, the man in the street has become more aware of the relea'se of economic data as this may forewarn a change in his primary savings medium. This study analysed sixteen economic variables to assess if they had an impact on the industrial index.The variables were grouped into three categories. 1) Inflation, interest rates and their indicators which comprised the CPI, PPI, M3 Money Supply, Total Private Credit, the yield on the 15 year government bond and the predominant overdraft rate on current accounts. 2) GDP indicators, consisting of; building plans passed, building plans complete, new vehicle sales, retail sales, manufacturing production and 3) The Foreign sectors namely; the Rand Dollar exchange rate, the Sterling Rand exchange rate, the Dow Jones Industrial Average, the Standard and Poor's 500 index and the Financial Times 100 index. The framework used to analyse the performance of the index was Gordons Growth Model. The model maintains that the present value of a share is equal to the discounted expected future value. This meant that two variables had to be forecast, a discount rate and a growth rate. The purpose of the study was not however to look at a single share in isolation, but rather an index comprising many shares. Thus GDP indicators were taken as macro proxy for growth. Both long and short term interest rates were considered as a discount rate. In an attempt to make expectations about these variables endogenous indicators that may forewarn a change in interest rates were also included. The liberalisation taking place on South Africa's financial markets, and the integration into the world fold due to globalisation demanded that a more parochial view be adopted. Hence the analysis was expanded to include the foreign sector. This involved making use of the exchange rate as well as overseas indexes.
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- Authors: Kussel, Craig Adam
- Date: 2012-08-28
- Subjects: Economic indicators - South Africa , Stock price indexes , Johannesburg Stock Exchange
- Type: Mini-Dissertation
- Identifier: uj:3327 , http://hdl.handle.net/10210/6729
- Description: M.Comm. , The aim of this study was to assess the effect that economic indicators have had on the performance of the industrial index of the Johannesburg Stock Exchange.This study was motivated as a result of the growth in participation on the JSE by local investors, both private individuals and through vehicles such as unit trusts and foreigners.The results of this participation have been twofold.Firstly, there has been an expansion in market participants research divisions in order to gain a windfall by predicting events ex-ante. Secondly, the man in the street has become more aware of the relea'se of economic data as this may forewarn a change in his primary savings medium. This study analysed sixteen economic variables to assess if they had an impact on the industrial index.The variables were grouped into three categories. 1) Inflation, interest rates and their indicators which comprised the CPI, PPI, M3 Money Supply, Total Private Credit, the yield on the 15 year government bond and the predominant overdraft rate on current accounts. 2) GDP indicators, consisting of; building plans passed, building plans complete, new vehicle sales, retail sales, manufacturing production and 3) The Foreign sectors namely; the Rand Dollar exchange rate, the Sterling Rand exchange rate, the Dow Jones Industrial Average, the Standard and Poor's 500 index and the Financial Times 100 index. The framework used to analyse the performance of the index was Gordons Growth Model. The model maintains that the present value of a share is equal to the discounted expected future value. This meant that two variables had to be forecast, a discount rate and a growth rate. The purpose of the study was not however to look at a single share in isolation, but rather an index comprising many shares. Thus GDP indicators were taken as macro proxy for growth. Both long and short term interest rates were considered as a discount rate. In an attempt to make expectations about these variables endogenous indicators that may forewarn a change in interest rates were also included. The liberalisation taking place on South Africa's financial markets, and the integration into the world fold due to globalisation demanded that a more parochial view be adopted. Hence the analysis was expanded to include the foreign sector. This involved making use of the exchange rate as well as overseas indexes.
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Optimal cross hedging relationships of internationally priced commodities in the South African context
- Authors: Le Roux, Corlise Liesl
- Date: 2017
- Subjects: Commodity futures , Hedging (Finance) , Johannesburg Stock Exchange , Investment analysis , Money - South Africa
- Language: English
- Type: Doctoral (Thesis)
- Identifier: http://hdl.handle.net/10210/271730 , uj:28906
- Description: Ph.D. (Finance) , Abstract: Commodities, which are a type of alternative investment, do not follow the normal characteristics of traditional investments. Because commodities do not act the same as traditional investments, the use of commodities for diversification purposes arises. Commodities can be used in normal investment decisions, which allows financial participants to improve the selection of assets included in an investment portfolio and ensure that returns are protected to some extent. Commodities have shown continuously changing co-movement over the last twenty-five years. This development has made investment decisions related to commodities more difficult and therefore resulted in more risk being present within the alternative investment class. Commodities have also shown a shift in fundamental behaviour over time, which results in findings that are not necessarily applicable to current market conditions. A second development that has occurred over the last ten to fifteen years is the financialisation of commodities as financial participants demand more investment opportunities. Without an understanding of the interaction of commodities with other financial variables or between other commodities, commodities as investment assets are limited and underutilised. The financialisation of commodities has emphasised the market efficiency related to commodities. The market efficiency has increased over the last decade as the speed of market reactions as well as the quantity of information to the market increased. These two concepts have made investing within traditional investments more difficult. With fewer traditional investment opportunities, investors have started searching for opportunities in other parts of the financial market, which has allowed alternative investments to develop as quickly as they have. Commodities have allowed for another avenue for diversification as well as hedging opportunities...
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- Authors: Le Roux, Corlise Liesl
- Date: 2017
- Subjects: Commodity futures , Hedging (Finance) , Johannesburg Stock Exchange , Investment analysis , Money - South Africa
- Language: English
- Type: Doctoral (Thesis)
- Identifier: http://hdl.handle.net/10210/271730 , uj:28906
- Description: Ph.D. (Finance) , Abstract: Commodities, which are a type of alternative investment, do not follow the normal characteristics of traditional investments. Because commodities do not act the same as traditional investments, the use of commodities for diversification purposes arises. Commodities can be used in normal investment decisions, which allows financial participants to improve the selection of assets included in an investment portfolio and ensure that returns are protected to some extent. Commodities have shown continuously changing co-movement over the last twenty-five years. This development has made investment decisions related to commodities more difficult and therefore resulted in more risk being present within the alternative investment class. Commodities have also shown a shift in fundamental behaviour over time, which results in findings that are not necessarily applicable to current market conditions. A second development that has occurred over the last ten to fifteen years is the financialisation of commodities as financial participants demand more investment opportunities. Without an understanding of the interaction of commodities with other financial variables or between other commodities, commodities as investment assets are limited and underutilised. The financialisation of commodities has emphasised the market efficiency related to commodities. The market efficiency has increased over the last decade as the speed of market reactions as well as the quantity of information to the market increased. These two concepts have made investing within traditional investments more difficult. With fewer traditional investment opportunities, investors have started searching for opportunities in other parts of the financial market, which has allowed alternative investments to develop as quickly as they have. Commodities have allowed for another avenue for diversification as well as hedging opportunities...
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An empirical analysis of the use of the can–do futures in agricultural commodity silo auction market : the case of the South African hedge funds
- Authors: Mataboge, Mpho
- Date: 2017
- Subjects: Hedge funds - South Africa , Johannesburg Stock Exchange , Basel III (2010)
- Language: English
- Type: Masters (Thesis)
- Identifier: http://hdl.handle.net/10210/271980 , uj:28938
- Description: M.Com. (Financial Economics) , Abstract: Since the 2008/09 financial crisis, hedge funds have been criticised for their excessive risk taking and lack of transparency involved in their trading strategies, facilitated by OTC derivatives. Basel III guidelines saw countries adopting stricter regulations to control for these risks, which led to increased costs of leverage – or initial margin – associated with the use of OTC derivatives. In addition, these regulations prohibit the ownership of physical commodities for South African hedge funds in particular. These regulations make it difficult for a South African hedge fund to participate in the JSE’s silo auction market for profit making opportunities. This study demonstrates a practical application of how a product offering from the JSE, called the ‘can-do’ future, allows hedge funds to participate in this market, thereby allowing them to trade basis. The study finds that initial margin is a key feature in profit making. Comparing the initial margin set by the JSE, and calculating using Basel guidelines, it appears cheaper to obtain leverage using an exchange cleared future such as the can-do, compared to a similar type of OTC derivative. As banks are not bound to follow Basel guidelines, the study goes further, to explore how initial margin calculated using 1-day VaR estimated by Historical simulation, Parametric and Monte-Carlo simulation methods compare. It is revealed that, should a bank opt to use these alternate methods of quantifying initial margin, the Historical method produces the cheapest and most accurate initial margin.
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- Authors: Mataboge, Mpho
- Date: 2017
- Subjects: Hedge funds - South Africa , Johannesburg Stock Exchange , Basel III (2010)
- Language: English
- Type: Masters (Thesis)
- Identifier: http://hdl.handle.net/10210/271980 , uj:28938
- Description: M.Com. (Financial Economics) , Abstract: Since the 2008/09 financial crisis, hedge funds have been criticised for their excessive risk taking and lack of transparency involved in their trading strategies, facilitated by OTC derivatives. Basel III guidelines saw countries adopting stricter regulations to control for these risks, which led to increased costs of leverage – or initial margin – associated with the use of OTC derivatives. In addition, these regulations prohibit the ownership of physical commodities for South African hedge funds in particular. These regulations make it difficult for a South African hedge fund to participate in the JSE’s silo auction market for profit making opportunities. This study demonstrates a practical application of how a product offering from the JSE, called the ‘can-do’ future, allows hedge funds to participate in this market, thereby allowing them to trade basis. The study finds that initial margin is a key feature in profit making. Comparing the initial margin set by the JSE, and calculating using Basel guidelines, it appears cheaper to obtain leverage using an exchange cleared future such as the can-do, compared to a similar type of OTC derivative. As banks are not bound to follow Basel guidelines, the study goes further, to explore how initial margin calculated using 1-day VaR estimated by Historical simulation, Parametric and Monte-Carlo simulation methods compare. It is revealed that, should a bank opt to use these alternate methods of quantifying initial margin, the Historical method produces the cheapest and most accurate initial margin.
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The ability of GARCH models in forecasting stock volatility on the JSE Limited
- Authors: Mokoena, Tholoana
- Date: 2016
- Subjects: GARCH model , Stock exchanges , Forecasting , Johannesburg Stock Exchange
- Language: English
- Type: Masters (Thesis)
- Identifier: http://hdl.handle.net/10210/124226 , uj:20891
- Description: Abstract: This study compares the fit and forecast performance of a selected group of parametric Generalised Autoregressive Conditional Heteroskedasticity GARCH (1, 1) models using various underlying distributions. The GARCH (1, 1) type models are empirically tested on the returns of the All Share Index (ALSI), a diversified portfolio of all the shares on the South African Johannesburg Stock Exchange (JSE). Estimates and forecasts generated by each model are compared and analysed to establish the validity and performance of the models. Forecasts given by the various GARCH (1, 1) models are bootstrapped and the efficiency of the models is also investigated through Value at Risk backtesting. The data used is composed of the returns of the ALSI from the 30th of September 2003 to the 14th of August 2013 and the data frequency is daily data. The best fitting distribution is the skewed normal distribution. With regards to the best fitting GARCH (1, 1) model, the E-GARCH (1, 1) model using the normal distribution performed best. The forecasting analysis showed the outperformance of the E-GARCH (1, 1) model and the best underlying distribution is the student’s t-distribution followed by the skewed normal distribution. , M.Com. (Financial Economics)
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- Authors: Mokoena, Tholoana
- Date: 2016
- Subjects: GARCH model , Stock exchanges , Forecasting , Johannesburg Stock Exchange
- Language: English
- Type: Masters (Thesis)
- Identifier: http://hdl.handle.net/10210/124226 , uj:20891
- Description: Abstract: This study compares the fit and forecast performance of a selected group of parametric Generalised Autoregressive Conditional Heteroskedasticity GARCH (1, 1) models using various underlying distributions. The GARCH (1, 1) type models are empirically tested on the returns of the All Share Index (ALSI), a diversified portfolio of all the shares on the South African Johannesburg Stock Exchange (JSE). Estimates and forecasts generated by each model are compared and analysed to establish the validity and performance of the models. Forecasts given by the various GARCH (1, 1) models are bootstrapped and the efficiency of the models is also investigated through Value at Risk backtesting. The data used is composed of the returns of the ALSI from the 30th of September 2003 to the 14th of August 2013 and the data frequency is daily data. The best fitting distribution is the skewed normal distribution. With regards to the best fitting GARCH (1, 1) model, the E-GARCH (1, 1) model using the normal distribution performed best. The forecasting analysis showed the outperformance of the E-GARCH (1, 1) model and the best underlying distribution is the student’s t-distribution followed by the skewed normal distribution. , M.Com. (Financial Economics)
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Risk-return nexus in a GARCH-M framework : empirical evidence from the South African stock market
- 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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- 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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Addressing the pitfalls of linear regression models in predicting stock returns in South Africa : Bayesian and non-parametric models
- Authors: Pane, Lucky
- Date: 2016
- Subjects: Johannesburg Stock Exchange , Stocks - Rate of return , Stocks - Mathematical models
- Language: English
- Type: Masters (Thesis)
- Identifier: http://hdl.handle.net/10210/215638 , uj:21441
- Description: Abstract: This study examines the predictability of stock returns on the Johannesburg Stock Exchange (JSE) by comparing a linear parametric model to the non-parametric and Bayesian models. These two models are compared to the linear model, as they are believed to capture its shortcomings (normality assumption, endogeneity and persistence), particularly in predicting stock returns. The out-of-sample performance of these models is compared using the Predicted Mean Square Error (PMSE), Mean Absolute Error (MAE) and the Diebold-Mariana (DM) test. Predictability using the DM test is examined over a range of forecast horizons. In all three models, the JSE stock return data is regressed against the dividend yield, JIBAR, consumer price inflation, S&P 500 returns and FTSE returns. The variables were chosen based on model selection criteria and empirical evidence of their usefulness in other studies, as there is little theoretical guidance on appropriate variables for forecasting stock returns. Examining stock return predictability in South Africa is important as the majority of the literature on this topic focuses on developed markets (Kadilli 2014, Apall and Gaarde 2011, Masih et al. 2010, Campbell and Thompson 2007, amongst others). Results indicate that model performance in forecasting the JSE returns depends on the performance criteria used. Using the PMSE and MAE, the linear model is found to have better forecasting ability than the nonparametric model. This is because PMSE and MAE are more appropriate to use when model errors follow a normal distribution (Chai and Draxler 2014). However, using the DM test, the nonparametric model shows better forecasting ability, as this test is applicable to non-quadratic loss functions, multi-period forecasts, and forecast errors that are not normally distributed, non-zero mean and contemporaneously correlated. In comparing the linear model to the Bayesian model, the latter out-performs the former, when the PMSE and MAE are considered. However, the DM test shows that both these models have the same forecasting ability. , M.Com. (Financial Economics)
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- Authors: Pane, Lucky
- Date: 2016
- Subjects: Johannesburg Stock Exchange , Stocks - Rate of return , Stocks - Mathematical models
- Language: English
- Type: Masters (Thesis)
- Identifier: http://hdl.handle.net/10210/215638 , uj:21441
- Description: Abstract: This study examines the predictability of stock returns on the Johannesburg Stock Exchange (JSE) by comparing a linear parametric model to the non-parametric and Bayesian models. These two models are compared to the linear model, as they are believed to capture its shortcomings (normality assumption, endogeneity and persistence), particularly in predicting stock returns. The out-of-sample performance of these models is compared using the Predicted Mean Square Error (PMSE), Mean Absolute Error (MAE) and the Diebold-Mariana (DM) test. Predictability using the DM test is examined over a range of forecast horizons. In all three models, the JSE stock return data is regressed against the dividend yield, JIBAR, consumer price inflation, S&P 500 returns and FTSE returns. The variables were chosen based on model selection criteria and empirical evidence of their usefulness in other studies, as there is little theoretical guidance on appropriate variables for forecasting stock returns. Examining stock return predictability in South Africa is important as the majority of the literature on this topic focuses on developed markets (Kadilli 2014, Apall and Gaarde 2011, Masih et al. 2010, Campbell and Thompson 2007, amongst others). Results indicate that model performance in forecasting the JSE returns depends on the performance criteria used. Using the PMSE and MAE, the linear model is found to have better forecasting ability than the nonparametric model. This is because PMSE and MAE are more appropriate to use when model errors follow a normal distribution (Chai and Draxler 2014). However, using the DM test, the nonparametric model shows better forecasting ability, as this test is applicable to non-quadratic loss functions, multi-period forecasts, and forecast errors that are not normally distributed, non-zero mean and contemporaneously correlated. In comparing the linear model to the Bayesian model, the latter out-performs the former, when the PMSE and MAE are considered. However, the DM test shows that both these models have the same forecasting ability. , M.Com. (Financial Economics)
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Sector specific long-run relationships between leverage and P/E ratios of companies listed on the FTSE JSE Top 40 Index
- Authors: Pedlar, Ashley Carin
- Date: 2018
- Subjects: JSE Limited , Johannesburg Stock Exchange , Stocks - South Africa - Rate of return
- Language: English
- Type: Masters (Thesis)
- Identifier: http://hdl.handle.net/10210/282343 , uj:30411
- Description: M.Com. (Investment Management) , Abstract: The relationship between leverage and normalised diluted trailing P/E ratios of firms listed on the FTSE JSE Top 40 Index was analysed. This study makes use of VAR analysis and VECMs to analyse whether there is a long-run relationship between the two variables. This study aims to provide insight on: (1) the distribution of the leverage and P/E ratios; (2) what influence the business cycle may have on leverage and P/E ratios; (3) the nature of any long-run relationships between leverage and P/E ratios of companies with respect to their specific sectors; and (4) the foundation for further research into the incorporation of leverage into valuation metrics. The data were separated for the purpose of analysis into their applicable sectors. The sectors included for analysis were: Basic Materials, Consumer Defensive, Energy, Financial Services, Industrials and Technology. Where applicable, the nature of any relationship was analysed further through the use of impulse responses and variance decomposition. The analysis highlights the variation between different sectors and their metrics, and reaffirms the importance of analysing the sectors in isolation from each other. The most conclusive results were found within the Basic Materials, Consumer Defensive and Industrials sectors. The data within the Basic Materials and Industrials sector showed that the P/E ratio was more endogenous than leverage. Leverage settled at a higher equilibrium for the Basic Materials sector and lower equilibrium for the Industrials sector, post a shock to leverage. Shocks for both sectors will result in a lower equilibrium level for price and earnings. The P/E ratio for the Basic Materials sector settles back at its initial equilibrium and the P/E ratio for the Industrials sector settles at a new equilibrium. A long-run relationship was found within the Consumer Defensive sector, with leverage being the more endogenous variable. This study provides a basis for further research into the relationship between sector leverage and P/E ratios. Additional analysis into relationships between core firm fundamentals and firm value would be beneficial. It also aims to provide a foundation for the incorporation of the findings of this study into the construction of a new or adjusted P/E ratio that can be used comparatively between different sectors of the JSE.
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- Authors: Pedlar, Ashley Carin
- Date: 2018
- Subjects: JSE Limited , Johannesburg Stock Exchange , Stocks - South Africa - Rate of return
- Language: English
- Type: Masters (Thesis)
- Identifier: http://hdl.handle.net/10210/282343 , uj:30411
- Description: M.Com. (Investment Management) , Abstract: The relationship between leverage and normalised diluted trailing P/E ratios of firms listed on the FTSE JSE Top 40 Index was analysed. This study makes use of VAR analysis and VECMs to analyse whether there is a long-run relationship between the two variables. This study aims to provide insight on: (1) the distribution of the leverage and P/E ratios; (2) what influence the business cycle may have on leverage and P/E ratios; (3) the nature of any long-run relationships between leverage and P/E ratios of companies with respect to their specific sectors; and (4) the foundation for further research into the incorporation of leverage into valuation metrics. The data were separated for the purpose of analysis into their applicable sectors. The sectors included for analysis were: Basic Materials, Consumer Defensive, Energy, Financial Services, Industrials and Technology. Where applicable, the nature of any relationship was analysed further through the use of impulse responses and variance decomposition. The analysis highlights the variation between different sectors and their metrics, and reaffirms the importance of analysing the sectors in isolation from each other. The most conclusive results were found within the Basic Materials, Consumer Defensive and Industrials sectors. The data within the Basic Materials and Industrials sector showed that the P/E ratio was more endogenous than leverage. Leverage settled at a higher equilibrium for the Basic Materials sector and lower equilibrium for the Industrials sector, post a shock to leverage. Shocks for both sectors will result in a lower equilibrium level for price and earnings. The P/E ratio for the Basic Materials sector settles back at its initial equilibrium and the P/E ratio for the Industrials sector settles at a new equilibrium. A long-run relationship was found within the Consumer Defensive sector, with leverage being the more endogenous variable. This study provides a basis for further research into the relationship between sector leverage and P/E ratios. Additional analysis into relationships between core firm fundamentals and firm value would be beneficial. It also aims to provide a foundation for the incorporation of the findings of this study into the construction of a new or adjusted P/E ratio that can be used comparatively between different sectors of the JSE.
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The impact of dividend policy on share price volatility of JSE ALTX listed companies
- 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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- 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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The relationship between executive remuneration and company performance : a study of 20 of the largest companies listed on the Johannesburg Stock Exchange Ltd.
- Authors: Resnick, Ariel A.
- Date: 2014-01-14
- Subjects: Chief executive officers - Salaries, etc. , Johannesburg Stock Exchange , Corporate profits - South Africa , Organizational effectiveness - South Africa
- Type: Thesis
- Identifier: uj:7884 , http://hdl.handle.net/10210/8775
- Description: M.Comm. (Financial Management) , Although general studies have been conducted on the agency problem, such studies have not focused on the relationship between executive remuneration and company performance. Many of the studies conducted abroad have focused on quantitative methods using regression analysis to understand the relationships between diverse financial performance measures and a variety of performance appraisal techniques. This study aims at establishing the relationship between executive remuneration and company financial performance on the basis of 20 of the largest companies listed on the Johannesburg Stock Exchange Ltd (JSE). It has been observed that JSE-listed South African companies have almost a standard governance framework for determining salary structures of CEOs and directors. Furthermore it can be seen that most performance-linked payouts for CEO's and directors are based on measurement criteria established which are based on actual performance levels achieved. For this reason, it may be concluded that short-term targets are crucial to keeping a business going, to ensure positive cash flows, manage working capital, and achieve year-on-year growth of revenues and profits. However, to ensure survival and sustainability of the business in the changing global and local environments, long-term strategies should be formulated and various steps should be taken by CEOs, supported by other executive and non-executive directors. This research focuses on short-term goals and their influence on executive remuneration for CEOs and CFOs. The performance measures selected for this study were revenues, profits, share price and net asset value. These performance measures selected are supported by the relevant academic literature. The results of this study reveal that CEOs and CFOs have received lower remuneration in the form of bonuses as a result of companies not achieving their short-term goals.
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- Authors: Resnick, Ariel A.
- Date: 2014-01-14
- Subjects: Chief executive officers - Salaries, etc. , Johannesburg Stock Exchange , Corporate profits - South Africa , Organizational effectiveness - South Africa
- Type: Thesis
- Identifier: uj:7884 , http://hdl.handle.net/10210/8775
- Description: M.Comm. (Financial Management) , Although general studies have been conducted on the agency problem, such studies have not focused on the relationship between executive remuneration and company performance. Many of the studies conducted abroad have focused on quantitative methods using regression analysis to understand the relationships between diverse financial performance measures and a variety of performance appraisal techniques. This study aims at establishing the relationship between executive remuneration and company financial performance on the basis of 20 of the largest companies listed on the Johannesburg Stock Exchange Ltd (JSE). It has been observed that JSE-listed South African companies have almost a standard governance framework for determining salary structures of CEOs and directors. Furthermore it can be seen that most performance-linked payouts for CEO's and directors are based on measurement criteria established which are based on actual performance levels achieved. For this reason, it may be concluded that short-term targets are crucial to keeping a business going, to ensure positive cash flows, manage working capital, and achieve year-on-year growth of revenues and profits. However, to ensure survival and sustainability of the business in the changing global and local environments, long-term strategies should be formulated and various steps should be taken by CEOs, supported by other executive and non-executive directors. This research focuses on short-term goals and their influence on executive remuneration for CEOs and CFOs. The performance measures selected for this study were revenues, profits, share price and net asset value. These performance measures selected are supported by the relevant academic literature. The results of this study reveal that CEOs and CFOs have received lower remuneration in the form of bonuses as a result of companies not achieving their short-term goals.
- Full Text: