The South African government auction mechanism: inference from cross-country analysis
Date
2013-06-03
Authors
Du Plessis, Johannes Jonathan
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Abstract
Idiosyncratic considerations relevant to South Africa’s economic and legal framework, as well as
determining factors taken from the financial markets and the asset being auctioned are used to
critically review the current auction mechanism used by the South African government to borrow
funds publicly. A logistic regression with panel data is used in the empirical analysis. The
dependent variable has a dichotomous outcome of uniform-price and discriminatory auction
mechanisms. Data from 43 different countries over the period 2005 to 2011 are used for the
analysis. It was hypothesized that countries with higher uncertainty about the price of their
public debt, should use the auction mechanism that reduces under-pricing. Results from the logit
regression supported this view. Upon comparing South Africa’s profile with the logit regression
results, alongside a review of the literature, it becomes apparent that the proposed model does
not provide a definitive answer. However, the model does aid policymakers’ decision on which
auction mechanism should be preferred over the other for South Africa.
Description
Thesis submitted in partial fulfilment of the requirements for the degree of Master of Management in Finance and Investment in the faculty of Commerce, Law and Management, Wits Businesss School, University of the Witwatersrand, 2012.
Keywords
Auction, Discriminatory auction mechanism, Government bond