MBA & MM Theses

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Subject: search.filters.subject.Johannesburg Stock Exchange

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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.
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    Monetary Policy Committee announcements and stock market reaction in South Africa
    (2011-03-22) Botha, Lourens Rasmus
    Monetary policy, and more specifically, inflation targeting through interest rate announcements, plays a major part in determining the movement in share prices. The purpose of the research was to determine whether there is a significant share price reaction to monetary policy announcements. The study also evaluated the performance of small firms relative to large firms, and further analysed whether there was a significant sector index reaction to monetary policy announcements on share indices on the JSE Securities Exchange Ltd. The first sample was for interest rate announcements made by the Reserve Bank, and included all announcements for the 2004 – 2007 period. During this time the Reserve Bank made a total of 10 announcements; all during normal working hours, hence the reason they are all included in the analysis. The second sample comprised data collected from the JSE for the 2004 – 2007 period for end-of-day share prices during the different event window periods (11 days). The sub problems were first to determine whether there was a significant share price reaction to monetary policy announcements, and secondly, to analyse the performance of small firms relative to large firms and their reaction to monetary policy announcements. Thirdly, the research aimed to determine whether there was a differential and significant reaction of the various sector indices to monetary policy announcements. The findings of the study are that, monetary policy announcements, and more specifically interest rate announcements, made by the Reserve Bank have not resulted in any significant changes on individual share prices, when comparing large and small shares and indices prices using the event study methodology and risk adjusted market model. ii The key message is that the JSE Securities Exchange is an efficient market, which incorporates any changes in monetary policy announcements made by the Reserve Bank quickly and efficiently with very little time lag. The conclusion in this study is that the equity market in South Africa is efficient.
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    SHARE PRICE REACTION TO OPEN MARKET SHARE BUY-BACK ANNOUNCEMENTS IN SOUTH AFRICA
    (2011-03-22) Blackstock, Gregg
    International studies have revealed a favourable market reaction, in terms of positive cumulative abnormal returns, to open market share buy-back announcements. The information signalling hypothesis is largely the attributor of share price response to share repurchases information. Returns of between 2% and 4% have been found in the short-term with repurchase activity in the US accounting for $180 bn annually in terms of transaction value. This Research Report analysed the returns of ordinary shares of companies listed on the JSE Securities Exchange who made open market share buybacks under a general authority. There were 107 share repurchase transactions analysed in this study with no sign of significant abnormal returns discovered in a comparatively small market where only R10 bn worth of open market repurchase activity was studied.