Electronic Theses and Dissertations (Masters/MBA)

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    The Impact of Commodity Prices, Interest Rate and Exchange Rate on Stock Market Performance in South Africa
    (University of the Witwatersrand, Johannesburg, 2023) Mudau, Phathutshedzo; Godspower-Akpomiemie, Euphemia
    The relationship between commodity prices and the stock market has been an important focus in literature. This relationship is especially important for a rich mineral resource country with an export-based economy like South Africa. Fluctuating commodity prices create significant business challenges, impacting production costs,product pricing and profitability. Understanding factors that affect the stock market performance becomes important, since the performance of the stock market is associated with the economic condition. This study examined the sensitivity of stock market performance to fluctuations in commodity prices and macroeconomic factors, using monthly data that spans from January 2005 to December 2020. Crude oil and platinum were selected as commodities while interest rate and exchange rate were selected as macroeconomic factors for this study. Ordinary Least Square (OLS) regression method was deployed, together with quantile regression, in this study to achieve the objective. The resulting OLS regression model was also tested for goodness of fit and the residuals tested to validate the model. It was found that commodity price fluctuations affect stock market performance positively and macroeconomic factors affect it negatively. An increase in platinum price caused an increase in the stock market performance. This reflects the importance of palatinum as one of the most produced and exported minerals in South Africa. Crude oil price fluctuations had a positive impact on the stock market performance. The positive impact could be due to South Africa’s trade balance or the source of the crude oil price shock. Exchange rate showed the highest impact on the performance of the stock market. Cheaper imports shift demand from locally produced goods in favour of import, affecting their profitability. Interest rate had a negative but insignificant impact on stock market performance.
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    The effect of exchange rate and inflation on the stock market returns of the top mining companies in South Africa
    (University of the Witwatersrand, Johannesburg, 2022) Mangere, Murehwa; Malikane, Christopher
    This research study examines the impact of nominal Rand/USD exchange rate and inflation on the nominal stock returns of top mining companies in South Africa that are listed on the Johannesburg Stock Exchange (JSE). The selected mining companies for this study formpart of the FTSE/JSE Precious Metals and Mining Index. The relevant data was collected from Bloomberg over a ten-year period (2010 to 2020). The Johansen cointegration analysis was applied to model the long run relationship between inflation, exchange rate and stock market prices for JSE Precious Metals and Mining Index. The study outcome revealed that, in the long run, there is a negative and significant relationship between inflation and the stock market returns. Exchange rate has a negative, though insignificant, impact on the stock market returns for FTSE/JSE Precious Metals and Mining Index in the long run. The outcomes of this study pose important implications, from both a policy and practical perspective. Based on the findings, it is recommended that from a policy perspective, the inflation policy must minimise and stabilise inflation fluctuations. This will result in investor confidence and more investments can be made to revitalise the precious metals mining sector. Furthermore, the findings suggest that exchange rate should be considered at valuation to hedge against currency risk and diversify investments
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    The Impact of Commodity Prices, Interest Rate and Exchange Rate on Stock Market Performance in South Africa
    (University of the Witwatersrand, Johannesburg, 2023) Mudau, Phathutshedzo; Godspower-Akpomiemie, Euphemia
    The relationship between commodity prices and the stock market has been an important focus in literature. This relationship is especially important for a rich mineral resource country with an export-based economy like South Africa. Fluctuating commodity prices create significant business challenges, impacting production costs, product pricing and profitability. Understanding factors that affect the stock market performance becomes important, since the performance of the stock market is associated with the economic condition. This study examined the sensitivity of stock market performance to fluctuations in commodity prices and macroeconomic factors, using monthly data that spans from January 2005 to December 2020. Crude oil and platinum were selected as commodities while interest rate and exchange rate were selected as macroeconomic factors for this study. Ordinary Least Square (OLS) regression method was deployed, together with quantile regression, in this study to achieve the objective. The resulting OLS regression model was also tested for goodness of fit and the residuals tested to validate the model. It was found that commodity price fluctuations affect stock market performance positively and macroeconomic factors affect it negatively. An increase in platinum price caused an increase in the stock market performance. This reflects the importance of platinum as one of the most produced and exported minerals in South Africa. Crude oil price fluctuations had a positive impact on the stock market performance. The positive impact could be due to South Africa’s trade balance or the source of the crude oil price shock. Exchange rate showed the highest impact on the performance of the stock market. Cheaper imports shift demand from locally produced goods in favour of import, affecting their profitability. Interest rate had a negative but insignificant impact on stock market performance
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    The key determinants of foreign direct investment in South Africa
    (2021) Rama, Kamil
    This study investigates the determinants of foreign direct investment (FDI) in South Africa using annual data for the period 1994-2018. The importance of FDI inflows to South Africa cannot be underestimated, it assists in creating value for investible assets and capital formation, but also brings much-needed stimulus to efficiency, productivity and economic growth. Despite being one of the major recipients of FDI in Africa when compared to other emerging countries the value of these inflows can be considered low and volatile. Based off the literature, Pesaran’ s Autoregressive Distributed Lag (ARDL) model was chosen as the method used to test for cointegration. The ARDL model tests the long-run relationship between FDI and its potential determinants and the error correction model (ECM) estimates the short-run dynamic parameters within the ARDL model. The empirical results show that in the long run exchange rate, trade openness and political stability are the most important factors in determining FDI inflows to South Africa. The short-run coefficients show that political stability has a significant positive effect on FDI inflows, while the number of BITS signed has a significant negative effect. The negative short-run coefficients seen with GDP and exchange rate are not notable due to the coefficients being statistically insignificant. The study recommends that he government should look to implement policies which help promote the liberalisation of restrictions around trade and the movement of capital. This should also include looking into increasing the consistency and transparency of fiscal, monetary and trade policies. Exchange rate targeting strategies should be implemented to help stabilize the exchange rate. Lastly the South African government should maintain regulatory policies which promote political stability and invoke investor confidence.
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    The key determinants of foreign direct investment in South Africa
    (2021) Rama, Kamil
    This study investigates the determinants of foreign direct investment (FDI) in South Africa using annual data for the period 1994-2018. The importance of FDI inflows to South Africa cannot be underestimated, it assists in creating value for investible assets and capital formation, but also brings much-needed stimulus to efficiency, productivity and economic growth. Despite being one of the major recipients of FDI in Africa when compared to other emerging countries the value of these inflows can be considered low and volatile. Based off the literature, Pesaran’ s Autoregressive Distributed Lag (ARDL) model was chosen as the method used to test for cointegration. The ARDL model tests the long-run relationship between FDI and its potential determinants and the error correction model (ECM) estimates the short-run dynamic parameters within the ARDL model. The empirical results show that in the long run exchange rate, trade openness and political stability are the most important factors in determining FDI inflows to South Africa. The short-run coefficients show that political stability has a significant positive effect on FDI inflows, while the number of BITS signed has a significant negative effect. The negative short-run coefficients seen with GDP and exchange rate are not notable due to the coefficients being statistically insignificant. The study recommends that he government should look to implement policies which help promote the liberalisation of restrictions around trade and the movement of capital. This should also include looking into increasing the consistency and transparency of fiscal, monetary and trade policies. Exchange rate targeting strategies should be implemented to help stabilize the exchange rate. Lastly the South African government should maintain regulatory policies which promote political stability and invoke investor confidence