3. Electronic Theses and Dissertations (ETDs) - All submissions
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Item The relationship between macroeconomic variables and capital structure decisions: empirical evidence from Botswana and Mauritius(2019) Chimbwete, NgodyaThe relationship between the impact of macroeconomic variables and capital structure decisions has been extensively researched through the years and across many countries. Despite the extensive research done, these studies have not been conclusive. This research paper studies this relationship of the impact of selected macroeconomic variables on the capital structure of companies in Botswana and Mauritius. These countries were chosen due to their differences in economic structure; Botswana has been seen to be a resource-based economy whilst Mauritius has been seen to been diversified economy. Furthermore, Stock Market Capitalization (MC) and Credit Growth in each country, were used as proxies for capital structure decisions. Results were both in support of and contrary to the theory and therefore arrived at the conclusion that because Botswana and Mauritius are subjected different economic dynamics (resource-based and diversified economies) it can be inferred that firms in the various countries will need to adjust their capital structures depending on how these variables interact within their respective economies.Item The relationship between stock market and the macroeconomy: evidence from Botswana(2017) Rapaeye, TebogoThis study investigates the relationship between macroeconomy and stock market. The specific objectives are to: (a) find out the macroeconomic determinant of stock returns, (b) establish long term relationship of macroeconomic and (c) find out if there are volatility spill overs between macroeconomic volatilities and stock returns volatility. Domestic Company Index (DCI) is used to represent stock returns and (a) Consumer Price Index to represent inflation, (b) USD/BWP as exchange rates, (c) Bank rates as interest rates and (d) M2 to represent money supply as macroeconomic variables. The relevance of Gross Domestic Product (GDP) is highly acknowledged but due to limited data, it was excluded from the study. The study used monthly data of the said variables from January 1994 to December 2014 to investigate the relationship. Classic Linear Regression model is applied to establish the explanatory power of macroeconomic variables on stock returns. Auto-Regressive Distributed Lag (ARDL) is used to find out the long term relationship and lastly GARCH (1,1) is applied to find out if there is volatility spill overs between macroeconomic volatilities and stock returns volatilities. This research established that exchange rates have a negative relationship with stock returns and money supply has a positive relationship with stock returns. It was also noted that there is no long term relationship between macroeconomic variables and stock returns. Lastly, it was noted that inflation volatility and money supply volatility have a spill over effect on stock returns volatility.Item South Africa's changing macroeconomic policy shifts: 1994-2010(2016) Maloyi, LungaThe purpose of this study is to analyse the changing nature of South Africa’s Macroeconomic policy in the post-apartheid era for the period 1994-2010. The key focus of the study is to uncover the factors that are a direct cause or have contributed to the paradigm shifts in policy during the specified period; supplementary to this, the study will look at how the changing paradigms have contributed in ridding the South African economy of its apartheid legacy, characterised by the triple challenges of poverty, unemployment and inequality. This study has a strong qualitative approach, comprising a comprehensive document review process, as well as 8 in-depth interviews with relevant experts in the field. This is further complemented by a supplementary quantitative analysis of key socio-economic data and statistics. The findings are that the observed paradigm shifts in macroeconomic policy during the period under review are a result of a number of key factors, namely: the changing domestic political discourse; the global and domestic economic climate; and the influence of domestic institutional arrangements, all of which have a direct impact on the policy discourse. Despite these paradigm shifts, South Africa continues to be faced with the triple challenge of poverty, unemployment and inequality; macroeconomic policy in the democratic dispensation has failed to deliver the core aims of South Africa’s economic development strategy. With the failures of orthodox neo-liberal macroeconomic policy, and the apparent shortcomings of Keynesian influenced redistributive macroeconomic policy, the key question facing policy makers is what direction South Africa’s Macroeconomic paradigm should follow. The idea of the developmental state, and its success in building emerging economies in South East Asia, is considered a viable option for South Africa to achieve an inclusive growth path.Item Impact of macroeconomic news on foreign exchange volatility(2016) Maserumule, TsekeFinancial economists have spent a considerable amount of time trying to understand the impact of macroeconomic news announcements on exchange rates, more so evaluating how new information is incorporated into exchange rates. This study examines the impact of macroeconomic news announcements on exchange rate volatility. Unlike most studies that utilise developed market currency pairs, this study utilises high frequency USD/ZAR data. Macroeconomic news can affect exchange rates directly and indirectly through public and private information. However, this study only focuses on scheduled macroeconomic news announcements as they usually have market forecasts available to conduct analysis regarding the asymmetric news effects. The following asymmetries are evaluated into the study: news items by geographical location, no-news vs. surprise news announcements and positive vs. negative news announcements. We make the following findings in our empirical study: (i) After the release of a news announcement, the level of foreign exchange volatility rises. This event is independent of whether the news item surprised the market or not. (ii) We find that both South African and US news items significantly impact USD/ZAR volatility, suggesting that both US and South African news items are being used to formulate investor expectations regarding the future prospects of the currency pair. (iii) Negative news appears to have a greater impact on exchange rate volatility relative to positive news. This result is also state dependent, as investors tend to behave differently to news depending on the economic climate at that point in time. Investor cognitive biases also give rise to the asymmetric news effects on exchange rate volatility. Investors do not always act in rational manner, especially when faced with multiple news items that are contradictory to each other.Item The impact of macroeconomic surprises on individual stock returns in South Africa(2017) Majija, Vuyokazi BongekaThis research report explores how various macroeconomic surprises impact on individual stock returns in South Africa. The focus of the study is on the individual constituent stocks of the FTSE/JSE Top 40 Index listed during the period January 2005 to December 2015. This report employs an event study and Bayesian Vector Autoregressive (BVAR) analysis approach to provide comprehensive insights into the relationship between the macroeconomic surprises and the individual stock returns in South Africa. This study closely mirrors a previous study conducted by Gupta and Reid (2013) which explored the impact of five macroeconomic surprises on general stock market indices (ALSI and JSE Top 40) and industry-specific stock returns in South Africa. However, in the interests of completeness and robustness, there are a few material differences and additional innovations introduced in this report. The event study results show that individual stock returns in South Africa are highly sensitive to GDP growth and CA surprises. Upon immediate impact, the GDP growth shocks cause negative stock returns indicating that initially market participants have a general dislike for the surprise element in GDP growth surprise announcements. However, post immediate impact, the stock returns increase and remain positive in line with widely hypothesized economic theory. In addition to GDP growth and CA surprises, the BVAR analysis indicates that USFed shocks have significant dynamic effects on individual stock returns in South Africa. The study finds that individual banking stocks and resource stocks are significantly sensitive to REPO surprises, whilst individual retail, property and consumer goods stocks are very responsive to GDP growth shocks.Item The yield curve as a predictor of real output and inflation: evidence from emerging markets(2017) Kobo, Sylvester BokganetsweFor developed economies, it has been shown that the slope of the yield curve is a good indicator of the future path of real output and inflation. This paper investigates the predictive abilities of the yield curve slope for domestic growth and inflation in emerging market economies. Given the sovereign risk premia in these economies, it also assesses whether adding the sovereign risk spread to the yield curve spread improves the predictive content of the yield curve. It finds that the yield curve can predict real output at both the short and long forecasting horizons in emerging economies, the extent of which differs across countries. It also finds that the predictive performance for inflation is weaker than that of output growth, especially in the shorter forecasting horizons, and that the sovereign risk spread has additional predictive content for growth and inflation. This suggests that market participants and monetary policy makers in these economies should supplement their forecasting models with information contained in the yield curve to forecast domestic growth and inflation.Item Effects of macroeconomic news on the South African financial markets: a domestic and foreign perspective(2017) Kotane, MauwaneThere is plenty of research examining the relationship between surprise macroeconomic data and financial returns, however, in a South African context, such research is scarce. This paper adds to the event study body of knowledge by studying the effects of South African macroeconomic announcements on South African financial returns and juxtaposing that with the relationship of surprise macroeconomic announcements released in the United States with the same local financial instrument returns. In this study, the review period is 10 years starting the beginning of 2006 and ending at the end of 2015. Two strands of economic news are studied, monetary news and real activity news against an equity futures index as a proxy for the South African Stock market; the R186 government bond as a proxy for the South African bond market and the spot US dollar to South African rand exchange rate. The monetary announcements studied are the interest rate adjustments of the South African and United States Central Banks and the consumer price index. The real activity data studied are the unemployment rate; the retail sales and the gross domestic product releases. Many of the findings in this paper were in line with much of the literature where evidence shows that monetary policy has a significant effect on fixed income and forex rates. Stocks were also to be shown to be sensitive to both types of data. The regression specification used in this study shows that local equities are more sensitive to both types of news, although mainly to South African news. Only monetary surprises are shown to be sensitive to the bond market and surprises from both countries. Evidence is that the rand is only sensitive to the interest rate announcements released in the United States.