MBA & MM Theses

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Subject: search.filters.subject.Johannesburg Stock Exchange.

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    Efficacy of following directors dealings
    (2014-07-22) Heasman, Lael
    ABSTRACT The purpose of this research report was to explore the efficacy of following directors‟ dealings. More specifically it tried to establish whether an outside investor could build a long term and profitable trading strategy on the JSE Securities Exchange South Africa (JSE) by trading only on receipt of an intense directors‟ dealing signal as the key strategy driver. Directors of companies on the JSE are obliged by regulation to report dealings in the shares of their own companies to the JSE. The theory is that directors have information which is not necessarily publicly available, against which they could trade in order to profit. If this is the case then an outside investor should also be able to profit when trading in line with this director activity. This report uses an alternative approach to the commonly used event study methodology. It instead uses a performance evaluation method on constructed portfolios to arrive at a result. The data used for this research included all dealings by directors from the Top 40 companies as listed on the JSE Main Board, between 2nd October 2000 and June 30th 2009, as announced through the JSE SENS service. The findings initially looked astoundingly positive with a 595.43% return over the study period when acting on signals embedded in directors‟ dealings, as identified by the proposed Outsider Portfolio Strategy. This translated to a 27.4% annual compounded return which is significant return on investment by any standards. It also ranked in the 95.8 percentile against 20,000 randomly generated portfolios which added further weight to the initial positive response. However, on investigation of the internal structure of that return, it was discovered that 36% of the return came from only one of the fifteen shares that triggered signals. Investigating that share, and others that delivered return, no correlation what-so-ever could be found between the periods of high performance for the shares, and the periods for which the Outsider Portfolio Strategy required the outside investor to be invested in those shares. As such the findings remain inconclusive and further investigation and research is recommended before any conclusive finding can be reached.
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    Foreign exchange risk exposure of listed companies in South Africa
    (2014-07-22) Molele, Mashukudu Hartley
    The increased international participation of South African firms not only presents opportunities, but also exposes South African firms to foreign exchange risk. The study investigated the association between unanticipated changes in exchange rates and excess returns of firms listed on the JSE, as a method of assessing the levels of foreign exchange risk exposure of nonfinancial firms in South Africa, both for the pre- and post-2008 ZAR currency crisis. All share price data, exchange rates data, and 3-month T-bill rates data were collected from I-Net Bridge. Levels of exposure to foreign exchange risk were measured through the augmented market model of Jorion (1990). The results from this study report levels of foreign exchange risk exposure of nonfinancial firms listed on the JSE as 34.4%, 33.3%, and 37.8% for the US$, GBP, and the euro respectively, for the full period i.e. July 2002 to July 2013 . The results show that nonfinancial firms listed on the JSE have a higher incidence of negative foreign exchange exposure across all three dominant currencies regardless of the period used to run the model. The post-2008 crisis period reported significantly lower levels of foreign exchange exposure, and a higher incidence of positive levels of foreign exchange exposure, than in the pre-2008 currency crisis period. The key message of the study is that exposure levels in South Africa in the post-2008 currency crisis period are significantly different to those levels in the pre-2008 crisis period. This means therefore that corporate treasury managers should review their hedging policies in the light of the changed external environment. The other message is that contrary to earlier studies that identified the US$/ZAR as the most important source of foreign exchange risk, this study established that the euro/ZAR is the more dominant source of foreign exchange risk in the South African market.