ETD Collection

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Now showing 1 - 6 of 6
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    An Investigation of the Low Beta Anomaly on the JSE
    (2016) Wright, Tarryn
    This study aims to investigate the presence of the low market risk (beta) anomaly in the Johannesburg Stock Market (JSE). Finance theory suggests that with higher return comes higher risk. However, several studies have reported evidence of low risk anomaly in global markets where portfolios containing low beta shares delivers superior risk adjusted returns compared to market index and high beta shares' portfolio. This study will explore various risk return relationships on the JSE and test a variety of potential explanations of the anomalous behaviour of the low beta premium. Three explanations have been identified as potential factors that contribute to the persistence of the Low Beta Anomaly. These include; Net International Equity flows (NIEF), Idiosyncratic Risk and Market Concentration. The results are consistent with international literature indicating a persistent Low Beta Anomaly on the JSE. However, the results also indicate that in periods of turmoil, high beta shares outperform low beta shares i.e. during the Global Financial Crisis. Although some significant relationships are found between the low minus high beta differential and NIEF. NIEF is unable to suitably explain the anomaly. Idiosyncratic risk results are mixed depending on the model used to calculate the idiosyncratic risk estimates. Despite being a significant issue on the JSE, Market concentration does not explain the Low Beta Anomaly. As the superior performance of the low beta portfolios remains once the portfolios returns have been adjusted for the different variables however magnitude ofthe outperformance ofthe low beta portfolio was to a lesser degree.
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    Covered call trading strategies in the South African retail equity market
    (2015-02-24) Humphreys, Mark
    The use of a Covered Call strategy has long been favoured by investors the world over for its potential to enhance yield in a long-only equity portfolio. There already exists a wealth of research examining the risk and return features and theories of this strategy. This paper aims to contribute to this debate by conducting research that is specific to the South African equity market and considered from the perspective of a retail investor, particularly by tracking the negative friction induced by transaction costs. It also seeks to answer the question of which Covered Call strategies provide the best risk-adjusted returns by pricing various expiry range and moneyness combinations over differing market trend phases during a 13-year period of trade on the JSE.
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    Evaluation of gold as an investment asset: the South African context
    (2013-07-26) Pule, Barrend Pule
    This study examines potential benefits of investing in various gold investment vehicles in terms of risk and return from a typical South African investor’s perspective. Furthermore, the study examines the relationship between gold price and South African macroeconomic variables. Data used in the study comprises of monthly closing share price data of JSE listed gold mining companies, gold price, Krugerrand coin, NewGold ETF, FTSE/JSE all share index, gold mining index, unit trust index (gold & precious metals), real GDP, rand/dollar exchange rate, repo rate and CPI. It was found that gold bullion produced superior abnormal returns and yielded greater capital growth compared to the JSE all share index. However, the JSE all share index exhibit lower volatility compared to gold bullion. Abnormal returns for JSE listed gold mining companies tend to differ substantially from gold bullion abnormal returns. Gold mining companies exhibit added risk which cannot be attributed to the gold bullion. Gold has a potential to reduce systematic risk when added to a portfolio of stocks. A multiple regression model was estimated which relates gold price to South African macroeconomic variables. It was found that gold price depends on real GDP and rand/dollar exchange rate.
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    Market reaction to industrial actions in South Africa.
    (2012-11-07) Ngidi, Nondumiso
    This study examines the impact of strike action on the stock market in SA, particularly the company share price. In recent years, SA has seen a steady increase in strike actions related to wage increases, which have generally been of short duration. The study is conducted by computing abnormal returns and subsequently cumulative abnormal returns for listed companies that had experienced strikes between 2003 and 2009. The sample included 49 listed companies on Johannesburg Stock Exchange. The results of the study reveal that stock prices react negatively to the news of a strike action five days prior to the strike and continue on a downward trajectory approximately 5 days post the strike action. The study finds that JSE is not an efficient market as it takes days for the market to return to equilibrium after an announcement. The research observed that there were numerous factors that influence the occurrence of strikes/industrial actions in South Africa namely; SA’s political history, trade unions irrational behaviour, information asymmetry and economic climate among other factor.
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    Motivating, constructing and testing the Fama-French three factor model on the Johannesburg Stock Exchange
    (2011-08-04) Basiewicz, Patryk
    The purpose of this dissertation is to motivate, construct and test the suitability of the Fama and French (1993) three-factor model in pricing equities listed on the Johannesburg Stock Exchange. Before this can be achieved, however, the existence of the size and the value effects needs to be established, and their resistance to risk adjustment with traditional asset pricing models needs to be ascertained. Once, these two empirical facts are documented, the three-factor model is built and tested. Results of Fama and French (1992) can be replicated on the Johannesburg Stock Exchange in that a firm‟s size and its value-growth indicator have reliable power to forecast stock returns. However, the value effect and, in particular, the size effect, attenuate after market microstructure is controlled for. Both effects are found to be independent of one another and the book-to-market ratio is found to be the best value-growth indicator. The static CAPM and an APT variant cannot explain the size and the value effects. This result is robust to time-series and cross-sectional tests. The three factor model of Fama and French (1993), and its variant, are constructed. The models can capture a substantial amount of time-series variation in most assets. When applied to the size and book-to-market sorted portfolios, they are not rejected in the vast majority of asset pricing tests. In tests on ungrouped data, the three factor model can explain the value effect, but not the size effect. However, in cross-sectional tests that use the size and book-to-market sorted portfolios as well as industry portfolios, the pricing errors of the three factor model are not substantially different from the ones obtained from the static CAPM.
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    Stock market liberalization and the cost of equity capital: An empirical study of JSE listed firms
    (2006-11-14T12:37:10Z) Makina, Daniel
    The main objective of the study has been to provide new insights into ongoing recent studies examining the impact of stock market liberalization at both macro and micro (firm) levels. The study focused on a single country, South Africa, whose exchange, the Johannesburg Stock Exchange (JSE), liberalized in the 1990s. Consistent with empirical evidence from other studies the study finds support at market, firm and sectoral level for the prediction by international asset pricing models that stock market liberalization reduces the cost of capital. More important, the study makes five major contributions to the literature on the impact of stock market liberalization in emerging markets. First, it demonstrates that some emerging market specific risks such as political and economic risks can act stronger binding constraints to foreign investment than direct legal barriers which foreign investors are frequently able to circumvent. The second contribution is the observation that there are some firms (in the minority however) that will experience a significant increase in the cost of capital following liberalization, a situation where the local price of risk is higher than the global price of risk, contrary to international asset pricing theory. The third contribution is that it has been empirically proved that the reduction in firms’ cost of capital following stock market liberalization is permanent. It is not a transitory phenomenon. The fourth contribution of the study highlights the influence of firm specific characteristics such as size of the firm, book-to-market ratios and leverage ratios on firms’ response to impact of stock market liberalization. The preference for large firms by foreign investors is supported, contrary to Merton’s (1987) recognition hypothesis, and hence highlights the inconclusiveness of the debate on whether stock market liberalization benefits both large firms and small firms. The fifth contribution is the observation that the effective liberalization date is not the same for all firms but varies from firm to firm.