3. Electronic Theses and Dissertations (ETDs) - All submissions
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Item Volatility spillover effect between real estate investment trust and financial assets in South Africa(2017) Ndamanomhata, Rosalia N.N.This research examines the dynamics of volatility spillover e ects between the real estate investment trust (REITs) and nancial assets in South Africa. It examined the following nancial assets; bonds, stock, currency and commodities based on selected indices recorded using closing prices. Using the Vector autoregressive and Dynamic Conditional Correlation MGARCH (DCC-MGARCH) model on weekly data from May 2013 to November 2017, there is evidence of both volatility spillover e ects and correlation between assets. In appreciation of existing econometrics applications, a thorough examination of the methodologies available is done to understand how volatility is transmitted between markets and their interdependency from assets over stipulated periods. The dynamic conditional correlation model (DCC-GARCH) is used to examine correlation of variables over time. This research found that correlations are signi cant, and are both negative and positive dependant on the interaction to a particular asset. The assets are not independent of each other due to this their relation proves the existence of spillover e ects. Furthermore, this research sought to establish (based on literature) the degree of spillover e ects to each nancial asset. Results revealed there was a bidirectional volatility spillover between equity and bond markets. The presence of volatility spillover e ects con rms the e ciencies of cross market information transmission and integration of nancial markets of di erent economies. Similarly the e ect of bonds to stock is uni-directional and yield di erent results compared to the relation of stock to bonds in line with similar studies done on emerging economies including South Africa. Results were analysed to determine asset correlation and determine the degree of varying integration which is linked to investors risk premium expectations, cost of borrowing and diversi cation bene ts for investors. Certain class of assets stood out as they were negatively correlated to other assets. Currencies were positively correlated to commodities, and negatively correlated to stocks, real estate stocks and bonds. These results are considered to be good news for managers who are in the business of minimizing risk and examine the optimal portfolio allocations in line with their risk preferences. Based on the correlation, optimal portfolios can be composed using asset substitution that yields the greatest return and less risk. In this regard, negatively correlated securities could produce a diversi cation bene t which reduces risks. Furthermore, the decomposition of the variance of forecast errors over a period of 1-20 weeks as to whether an e ect of shock originates from REITS to other assets. Overall real estate accounts for 0.03 % to 53.43% of uctuations of the forecast error variance for other assets. Using the nancial 15 and industrial 25 as point of reference for stock index for the over examination of externalities; real estate a ects the returns of this index, accounting for 53.47% and while the Pula, palladium and British pound accounts for 3.52%,2.13% of the forecast error variances in for nancial index companies. While the nancials 15 index a ects the returns of other indices as well, contributing 29.68%, 11,60% for real estate and 1,74% for palladium. For Industrial 25, Financials 15 and Reits had the least e ects over time on its return with a decrease in uctuations at 4.08% and 0.56% respectively. Compared to the 1st week, during the 20th week the index returns are increasingly caused by shocks from other assets as its estimation of returns by itself decreases at 6.66%. Which means the returns of the index is not independent of other variables.Item Facilitating high growth enterprises through seed stage investing in South Africa(2018) Zvobwo, MmathebeThis thesis finds its theoretical roots in the theory of the firm growth and focuses on high growth entrepreneurship. Entrepreneurial orientation and venture capital funding also become central to the research particularly with regards to the identification of high growth enterprises (HGEs) and understanding their employment creation in the South African context. [Abbreviated Abstract]Item A comparison of returns of portfolios formed using technical analysis and fundamental analysis in South Africa(2017) Dingile, SimiloIn a market where it has become difficult to find value, it has become very important for portfolio managers and analyst to find approaches to investing that still hold value and are less correlated with market returns. In this research project a strategy, which combines technical analysis strategies and fundamental analysis strategy was studied to find out if it is possible for an investor who uses both strategies to earn better returns than an investor who relies only on one strategy. Three technical analysis strategies were combined to form one strategy. The three strategies were also studied separately so as to see if they produce returns that are significantly better than a fundamental analysis strategy that uses Piotorski’s (2002) F_score approach to invest. It was found that individual technical analysis strategies do not produce returns that are significantly better that the fundamental analysis strategy. However, it was found that a strategy that uses both fundamental analysis and technical analysis produces average returns that are better than average returns produced by any of these strategies used independently. Technical analysis strategies produced returns that showed very little correlation with an equally weighted benchmark when regressed on the CAPM. Equally weighted portfolios of the strategies showed no conclusive evidence of the presence of abnormal returns. The success rate of the technical analysis strategies was found to decline over time, which suggested that the Johannesburg Stock Exchange (JSE) is becoming weak form efficientItem The viability of using markowitz portfolio theory as a passive investment strategy on the JSE(2015) Els, Tilo UdoMarkowitz Portfolio Theory (MPT) and related research was studied. Objectives were then formulated around whether an MPT model could outperform the returns of the Johannesburg Securities Exchange (JSE) and other financial instruments such as unit trusts. An MPT model was then created in Matlab using the information learnt from the theory and other appropriate sources. The model was used to generate a range of results depending on different inputs into the model. The model outputs were further analysed in Excel and results in the form of tables and graphs were created. It was found that the MPT model considerably outperforms the JSE ALSI and JSE Top 40. There were many positive Sharpe Ratios for various different inputs and model parameters. The JSE ALSI had a 1 year return of 17.13% and 3 year annualised return of 12.83%. The MPT model had 1 year returns of between 17.07% and 37.81%. The MPT model had 3 year annualised returns of between 11.81% and 26.24%. The MPT model outperformed the JSE ALSI with 5 out of 6 portfolios created. The JSE Top 40 had a 1 year return of 18.37% and 3 year annualised return of 13.02%. The MPT model had 1 year returns of 21.49% and 24.24% and 3 year annualised returns of 18.53% and 20.72%. The MPT model for Top 40 data thus outperformed the JSE Top 40 over 1 year and 3 years annualised. The MPT model had two out of its eight portfolios in the top four of the best performing unit trusts over 3 years of total returns. Over a 1 year return, two of the MPT portfolios were the top two performers compared to other unit trusts. This research has thus shown that an MPT model using historical data can outperform the JSE and can perform competitively with other unit trusts.Item An empirical assessment of the key drivers of sovereign bond yields in South Africa: it’s not just about fundamentals(2017) Mpakama, Sinovuyo LusandaThe writer studies the short-run determinants of bond yield volatility in South Africa (SA) by analyzing the impact that global factors –representing global funding conditions – have on the changes to the rand denominated generic 10-year government bond yield (SAGB). This is followed by a one-period forward forecast of this volatility. The explanatory variables tested in this study are as follows: net bond purchases by foreign investors, Chicago Board Options Volatility Index (VIX), JP Morgan Emerging Market Bond Index (JP EMBI) spread, the US dollar to SA rand (USDZAR) exchange rate, the SA 5 year credit default swap (CDS) rate, the 12 month interest rate expectation/9x12 forward rate agreement (FRA), dollar spot price of gold and dollar spot price of oil. The study period ranges from January 2000 to December 2015. The GARCH modelling technique is used due to its ability to capture the volatility clustering effects observed in time series return data. The writer used the Gaussian distribution as the default model, however in order to control for the skewness and fat-tails in financial market return data, the Student-T and Generalised Error distributions are also tested to see if the non-normally distributed bond returns could be better captured by alternative parametric assumptions. The results show that all the explanatory variables, with the exception of the FRA, are statistically significant in explaining volatility in the local generic 10-year government bond.Item The effectiveness of value style investing in South Africa(2016) Langa, Senzo InnocentStyle investing is a well-documented global phenomenon that refers to the manner in which investors formulate their capital allocation decisions. The two broad styles of investing to be discussed in this report are the ‘value style’ and the ‘growth style’ investing. Recent empirical research suggests that value style of investing outperforms growth style investing over the long term. Rational theories suggest that a value premium exist because value counters have higher unsystematic risk. However, theories such as behavioural finance attribute the value premium to more psychological social factors such as emotional and heuristic biases. The aim of this study was to determine whether value style investing outperforms growth style investing in South Africa. For the purposes of this study, we evaluated the performance of various portfolios for the period of December 2000 to December 2015. In addition, the study determined the relative risk of the two styles, by testing whether value outperforms growth during periods of financial crisis, and during a period of slow economic growth. In defining the parameters of our study, we divided the constituents of Financial Times and London Stock Exchange/Johannesburg Stock Exchange (FTSE /JSE) index into growth and value based on their relative Price to book (P/B) going back to December 2000. This created four portfolios; namely, Deep value, Relative value, Relative growth and Super growth. Portfolio Analytics were employed to determine which style outperforms over the period. Regression analyses was used to ascertain which portfolio generated abnormal risk adjusted returns over the period. Relative risk is also analysed. The results of this research indicate that there is limited evidence of value premium in South Africa over the period of the study, albeit there are some periods where one style is dominant over the other. Regressions suggest that none of the portfolios constructed using market capital weighted generate abnormal returns. However, deep value, relative value and relative growth portfolios generate abnormal returns when constructed on equalweighted basis. On a relative risk basis, deep value outperforms during the financial crisis, whereas relative value outperforms during economic slowdowns.Item Determinants of private equity exit strategies in South Africa(2017) Agyapong, NtiamoahThe objective of this paper is to study the exit behaviour of private equity investments held by independent private equity firms in South Africa. As this is an exploratory study we examine empirical hypotheses previously tested by other authors. Firstly, we test whether portfolio companies within high technology sectors are more likely to achieve an initial public offering (IPO) exit relative to other exits. Secondly, we test the effect of the lending rate on the likelihood of a secondary sale. Lastly, we consider the relative preference of IPO compared to acquisition (M&A) and other exit modes. As South Africa is considered to be a bank-centered financial system (Levine, 2002), private equity investments within the market would be expected to experience poor IPO activity as suggested by the literature (Black and Gilson, 1998).The research is quantitative in nature and involves the use of statistical modelling, multinomial logistic regression was applied, using panel data, which assumes that the effect of explanatory variables on the choice of exit varies across observations (private equity firms) and over time. From the multinomial logit model it was found that; 1) High technology firms were more likely to be exited by means of M&A rather than IPO; 2) An increase in the lending rate was found to increase the likelihood of a Secondary sale which is contrary to previous research (Sousa, 2010); and 3) M&A was found to be the most likely mode of exit assuming all explanatory variables were at their mean, while IPO was the least likely mode of exit.Item How can targeted private investment in land-use management maximise returns to capital and ecosystem infrastructure in South Africa?(2016) Maguire, Gray Garth MeriadecThis report examines the potential for private in commercial land-use activities to yield a positive return to capital as well as ecosystem infrastructure in South Africa. Intact ecosystem infrastructure in South Africa is concentrated in the Eastern Cape, Kwa-Zulu Natal and Mpumalanga, all of which have a high prevalence of communal land-ownership and small-scale farmers. These areas are under threat of rapid degradation from poor land-use practices including over-grazing, over-harvesting of forestry products, alien encroachment and over-frequent burning resulting in soil erosion and degradation, decreased water retention and quality as well as denudation and biodiversity loss. As such developing effective strategies to respond to the drivers of land degradation is a critical task for ecosystem goods and services preservation. While the majority of existing state led strategies around sustainable land-use, land-reform and rural development in these areas have proven ineffective there are notable exceptions emanating from the state, NGOs and the private sector. This report analyses these examples in case study format, pointing out the key features of each case with regards to the enabling environment and primary outcomes from both a financial and ecosystem infrastructure returns perspective. Specific attention is also given to the development of effective social processes that have a proven track-record improving the social base that underlies effective socio-ecological systems. The end goal of the report is to provide a theoretical model designed for real-world application