MBA & MM Theses

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Subject: search.filters.subject.Johannesburg Securities ExchangeSubject: search.filters.subject.Share prices

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Now showing 1 - 6 of 6
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    Size- and Book-to-Market Anomalies on the JSE – Testing for the effect of market condition
    (2011-11-11) Gudde, Christian Rudolf
    The aim of market investors is to maximise their returns from the market. Often they do this by the use of historical financial (and other relevant) information about companies and their share prices. The search for arbitrage opportunities has led to the identification of anomalies such as the size and book-to-market effects but very little research has gone into the changing of these effects over time. They have generally only been identified over long time periods on markets around the world. This investigation used the returns of portfolios based on market capitalisation or book-to-market ratio (or both) and regression analyses at specific dates at which the market conditions changed from those of a bull market to those of a bear market. This study has shown that magnitude and direction of the size and book-to-market effects change over time and that the market condition (bull or bear) is not a direct indicator of the state of the effect, although it does seem to suggest a lagged impact. The research suggests that there are significant and exploitable differences in portfolios chosen along the lines of market capitalisation or value indicators. Though no causal relationship for the existence of these anomalies has yet been identified, it seems that bear-market conditions have an impact on the magnitude (and direction) of anomalies. Since this impact continues to be seen after the bear markets, this knowledge could be exploited to reduce losses (by disinvesting in stocks that are likely to yield worse results) or even increase gains in portfolios depending on prevailing market conditions
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    The Effect of Dividend Signalling on Earnings and Share Prices in South Africa
    (2011-05-19) Mohamed, Nadim
    The dividend information signalling hypothesis is one of the more popular theories that address the questions: “Why do companies pay a dividend?” and “Should the dividend have any effect on firm valuation?”. A key premise of the signalling hypothesis is that the dividend contains information regarding management’s insider view of a firm’s future prospects. As a consequence, investors are expected to revise their valuation of a firm upon the release of news of a substantial change in dividend. Furthermore, the dividend change itself is expected to be positively correlated with future changes in firm performance. This study provides evidence regarding the relevance of the signalling hypothesis for the JSE by measuring both of these consequences. A total of 238 dividend change events were collected for the period 1998-2008. The methodology employed improves on previous South African studies by considering the common practice of declaring dividends together with earnings releases. Regression analysis is used to isolate the effect of only the dividend portion of this joint dividend-earnings signal. It was found that the 2-day cumulative abnormal return on the day of a dividend announcement is positively related to the change in dividend from previous year to announcement year. This implies that the market reacts positively to dividend increases and negatively to dividend decreases. However, changes in earnings in the year following the announcement are, at best, weakly correlated with the observed change in dividend. This finding suggests that the dividend information signalling hypothesis is not a good justification for the observed market reaction to dividend events on the JSE. Other theories such as the Agency Theory might be more successful in explaining this market reaction
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    Predictability of share price returns on the JSE
    (2011-05-11) Lishman, Ryan Mark
    This study addresses the issue of shar eprice predictability on the JSE Securities Exchange (JSE) over the 1989 to 2009 period. Th eoverall predictability of the JSE in terms of market indices and individual share prices is examined. The predictability in prices of portfolios formed by ranking shares according to a number of easily observable benchmarks is also investigated. Finally, the study identifies leading indicators of the returns of these ranked portfolios. Using a variance ratio test, the study finds little evidence to reject the hypothesis of uncorrelated increments in the JSA All Share Index or in the returns of individual shares. The study does, however, reject the hypothesis that returns of portfolios ranked according to market capitalization, dividend yield, earning yield, industry and trading volume are serially uncorrelated. Furthermore, the strong rejections of these hypotheses retain their statistical significance in the presence of heteroskedasticity in portfolio returns. In line with the results of previous research, the study finds that serial correlation in portfolios increases as the markets capitalisation and average trading volume of its constituents decrease. Portfolios containing high dividend and earnings yield shares are also found to have a high degree of serial correlation. When ranked according to the industry in which their constituents are classified, portfolios of industrial and retail shares show significant levels of serial correlation. Analyses of he load and lag characteristics of portfolios show that the returns of portfolios consisting of large capitalisation and well traded shares lead those consisting of small capitalisation and thinly traded shares. The economic and staistical significance of the results show a significant deviation from the commonly held view that the JSE is an efficient market. From the point of view of an investor seeking a potential avenue of excee return, the challenge lies in constructing a trading strategy and a portfolio with sufficient serial correlation to be robust to the costs incurred from frequent trading.
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    IMPACT OF RESOURCE PRICES AND THE EXCHANGE RATE ON RESOURCE COMPANY SHARE PRICES LISTED ON JSE LTD
    (2011-05-10) Klasen, Norman Bengt
    It is believed that resource companies which derive their earnings from selling resources predominantly in foreign currency should be significantly exposed to both the exchange rate and the resource price. The aim of this research was to better explain the exposures facing resource companies listed on the Johannesburg Stock Exchange by including both the exchange rate as well as the underlying resource prices. The study made use of ARIMA modelling to remove each data series relationship with time and correlation analysis to establish if a significant relationship existed. The study was conducted over a three, five and ten year period. The findings indicate that the resource index had a significant relationship with the exchange rate over all three periods and that 53% of resource companies had a significant relationship over the 5 and 10 year periods, this dropped to 35% over the 3 year period. As for the underlying resource prices, it was found that the resource index had a significant relationship over all 3 periods and that 82% of the firms in the study had a significant relationship over the 5 and 10 periods and 76% over the 3 year period.
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    FACTORS INFLUENCING
    (2011-04-12) Frolich, Anton
    Black Economic Empowerment is an important and influential aspect of South Africa’s economy. Firms listed on the Johannesburg Securities Exchange have been engaging in deals aimed at Black Economic Empowerment for a number of years. These deals are typically complex and include many aspects that are of particular interest to the affected shareholders. The recent formalisation of Broad-Based Black Economic Empowerment through legislation and the introduction of sector charters, which embody diverse objectives, have added to the complexity of contemporary deals. This study investigates some of the aspects of these deals that might affect shareholder sentiment about the firms in question and hence those firms’ share prices during the public announcement of deal particulars. The results of this research show a post-announcement negative abnormal return for the total sample of Black Economic Empowerment deal announcements, but this response is shown to be a combination of component responses to specific aspects of the deals studied. The most influential aspects of these deals included: The extent to which the deals are Broad-Based, the possible dilution of shareholders’ equity, the firms’ states of compliance after the deals and the extent to which the firms are dependant on government as a client or for approval.
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    PRICING OF SINGLE STOCK FUTURES OPTIONS IN SOUTH AFRICA
    (2011-03-25) Cameron, Brian
    "JSE tops all single stock futures markets" (Business Report, July 13, 2007). The Johannesburg Securities Exchange's (JSE) single stock futures market is the largest in the world. This research investigates the forecasting abilities of implied volatility models for South African single stock future options and warrants. Furthermore, the pricing premiums between the two derivative instruments are investigated, as this presents a potential arbitrage opportunity for the market makers of the warrants. Historical volatiity is used as a comparative forecast method to the implied models. The calculated historical and implied volatilities are compared retrospectively to the realised volatility to ascertain which forecasting methodology is superior. Inter-bank implied volatility for single stock futures options is compared to implied volatility for warrants with the same underlying shares to determine pricing premiums. The simple historical volatility model is shown to be a better forecast of realised volatility for both derivatives. Warrants are charged at a significantly higher premium than what the market makers, amongst themselves, are willing to pay for the same underlying shares with single stock futures options.