ETD Collection

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Author: search.filters.author.Seetharam, Yudhvir

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    The dynamics of market efficiency: testing the adaptive market hypothesis in South Africa
    (2016) Seetharam, Yudhvir
    In recent years, the debate on market efficiency has shifted to providing alternate forms of the hypothesis, some of which are testable and can be proven false. This thesis examines one such alternative, the Adaptive Market Hypothesis (AMH), with a focus on providing a framework for testing the dynamic (cyclical) notion of market efficiency using South African equity data (44 shares and six indices) over the period 1997 to 2014. By application of this framework, stylised facts emerged. First, the examination of market efficiency is dependent on the frequency of data. If one were to only use a single frequency of data, one might obtain conflicting conclusions. Second, by binning data into smaller sub-samples, one can obtain a pattern of whether the equity market is efficient or not. In other words, one might get a conclusion of, say, randomess, over the entire sample period of daily data, but there may be pockets of non-randomness with the daily data. Third, by running a variety of tests, one provides robustness to the results. This is a somewhat debateable issue as one could either run a variety of tests (each being an improvement over the other) or argue the theoretical merits of each test befoe selecting the more appropriate one. Fourth, analysis according to industries also adds to the result of efficiency, if markets have high concentration sectors (such as the JSE), one might be tempted to conclude that the entire JSE exhibits, say, randomness, where it could be driven by the resources sector as opposed to any other sector. Last, the use of neural networks as approximators is of benefit when examining data with less than ideal sample sizes. Examining five frequencies of data, 86% of the shares and indices exhibited a random walk under daily data, 78% under weekly data, 56% under monthly data, 22% under quarterly data and 24% under semi-annual data. The results over the entire sample period and non-overlapping sub-samples showed that this model's accuracy varied over time. Coupled with the results of the trading strategies, one can conclude that the nature of market efficiency in South Africa can be seen as time dependent, in line with the implication of the AMH.
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    Fusion investing: an esoteric approach to portfolio formation
    (2012-07-03) Seetharam, Yudhvir
    This study contributes to the debate on active and passive portfolio management by providing an alternate means of constructing an active portfolio. This “fusion strategy” has underpinnings in the realm of behavioural finance, namely the value-growth phenomenon and the momentum effect. The fusion strategy developed in this study was compared against two passive benchmarks and four active benchmarks. All returns are calculated net of transaction costs, initially set to 1% per month per share. Statistical testing, done via stochastic dominance, yielded inconclusive results in the majority of cases. The exception however, was that Fund B stochastically dominated the fusion strategy at second order. This implies that a risk-averse investor would prefer to invest in Fund B. By the use of Sharpe and Treynor ratios, the results were also inconclusive. However, the Sortino ratio shows that the fusion strategy outperforms all benchmarks chosen, except Fund A. The performance of the fusion strategy was also not induced by either a sector rotation strategy, the existence of the January effect or by the level of transaction costs.