3. Electronic Theses and Dissertations (ETDs) - All submissions
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Item Efficiency, risk and productivity patterns in South African development finance institutions(2018) Mokete, TsukuluLike most commercial banks that needs to convert deposit (input) into loans (outputs) efficiently, the cost of bringing about the developmental mandate for the DFIs needs to be kept at the minimum, whilst producing maximum output. Whilst there is a wide literature on a traditional measure of efficiencies from the credit allocation perspective, few or no studies are available in linking the risk incurred by DFIs - due to their operational mandate- to their relative efficiencies and productivity patterns. The paper assessed the relationship between efficiency, risk and productivity patterns, within the DFIs. Principally the main area of interest is understanding the relationship between risks that DFIs are mandated to take and their effect on efficiency levels. The results firstly indicated that operational inefficiencies resulting from inability to allocate resources and cost were the primary source behind the DFIs inefficiencies. Turning to the second objective, the analysis reveals that the nexus between risk and efficiency does not exists for the South African DFIs. The majority of the DFI in SA are government funded to assume a certain risk in an effort to achieve the developmental goal.Item Volatility and the asset allocation decision(2017) Schwalbach, Joao BrunoThis dissertation investigates the inclusion of volatility into the asset allocation decision, first as an asset class, and second as a tool for dynamic equity allocation. An examination on whether volatility exposure as an asset class has the necessary characteristics to form part of the broader investment universe is conducted. This is accomplished by comparing the risk-return characteristics of three naked option-selling strategies, a bull put spread strategy and a VIX futures strategy with the S&P 500 Index. Each volatility strategy is also included as part of a 30/30/40 volatility/equity/bond portfolio and compared to a traditional 60/40 equity/bond portfolio. Historically, the results indicate that all individual volatility strategies generated superior Sharpe ratios and exhibited less severe drawdowns than the S&P 500 Index, particularly during the 2008 Global Financial Crisis. Additionally, all volatility blended portfolios experienced better tail-risk profiles than the 60/40 equity/bond portfolio, with the naked option-selling strategies also generating similar returns as the 60/40 portfolio both over the full sample period as well during the period of recovery following the 2008 Global Financial Crisis. The results suggest that the returns associated with option-selling strategies are consistent, and have resulted in strong long-run risk-adjusted performance, qualifying short volatility exposure attained through option-selling strategies as an asset class. It however remains unclear whether the VIX futures strategy qualifies as an asset class given that it aims to exploit a market anomaly in the form of potentially non-priced volatility clustering in the S&P 500 Index. While the strategy generated considerable outperformance from 2004 to 2009, it underperformed from 2009 to 2016 suggesting that much of the non-priced volatility clustering has since been traded away. Drawing on the evidence of volatility clustering in equity markets, a managed volatility trading rule that regulates portfolio exposure between cash and equity based on how high the prevailing volatility level was relative to historical volatility levels is developed. Although transaction costs were not accounted for, the results indicated that the managed volatility trading rule has historically generated considerably superior Sharpe ratios than equity in developed and developing markets. In conclusion, volatility exposure attained through option-selling strategies has proven to be an attractive asset class, and historical evidence suggests that its inclusion into a traditional 60/40 equity/bond portfolio is likely to reduce the risk of future risk-adjusted underperformance relative to what had been achieved in the past. Additionally, the managed volatility trading rule remains an attractive alternative to investors who are precluded from investing in volatility as an asset class.Item Systemic factors in the investigation of South African railway occurrences(2017) Hutchings, JessicaThe principle focus of this research is to provide a novel approach to accident investigation theory by focusing on the investigation process itself as a complex system. A number of systemic factors inherent in this system impact on the effectiveness (accuracy, quality, validity, reliability and objectivity) of railway investigations. There is a need to explore why railway occurrences remain high in South Africa, despite railway Operators investigating occurrences. If occurrences are investigated, why then do the number of events remain unchanged? Ineffective investigations impact on the accuracy of the findings identified and the suitability of the recommendations. Added to this is the failure of implementing recommendations from investigations contributing to the high number of occurrences and repeated occurrences. Complex influencing factors inherent within the railway system influence the actual investigation process and therefore its effectiveness. This is despite interventions put in place by various organisations, industries, and sectors to improve railway safety. A critical review of the literature, in terms of accident investigation theory, indicates that the current research targets various approaches, methods and models to determine why accidents occur; from a human, technical, or system perspective. The literature focusses on accident causation by addressing the system and its role in contributing to such events. However, very little critical analysis exists on the actual investigation process of accidents as a complex system in its own right, and its contributory role in the ongoing high number of accidents. Rasmussen’s (1997) Risk Management Framework is used in this research to illustrate the South African railway system hierarchy. A qualitative mixed methods approach using triangulation was adopted. Methods included a print media analysis of reported railway accidents, document analyses of governance documents, analyses of railway investigation reports, semi-structured interviews with railway investigators and observations of investigation inquiries. Thematic content analysis was conducted to identify the themes emerging from the data. The results indicate that systemic factors influence the manner in which occurrences are investigated. Examples include no National Rail Policy, limited resources to investigate, shortage of skilled investigators, absence of investigator training, non-compliance to governance documents, an underinvestment in rail, financial constraints, and a blame culture. An Accimap summarises the systemic factors impacting on the effectiveness of the accident investigation process, its outcomes and the recurrence of accidents. Conclusions demonstrate that the accident investigation process is indeed an example of a complex system. Systemic factors collectively behave to influence the effectiveness of the investigation process, but also on the bigger rail socio-technical system which impacts on the safety, reliability and efficiency of the South African railway system. The theoretical contribution of this research is identified in the useful and novel application of Rasmussen’s (1997) Risk Management Framework to illustrate that the accident investigation process is an example of a complex system. Adjustments to Rasmussen’s (1997) Risk Management Framework were made in order to contextualize it to the problem of this research, confirming the importance and application of Rasmussen’s work in the system of accident investigations and not only in accident causation.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 Endogenous and exogenous risk factors in the success of South African small medium enterprises(2017) Galawe, Ntombikayise JabulileThe objective of this study is twofold: first to evaluate the magnitude of the effect of endogenous and exogenous risk factors in the success of South African (SA) small and medium-sized enterprises (SMEs); second, to develop a framework for an integrated risk assessment model that can be used to assess SA SMEs holistically. Drawing from the entrepreneurial ecosystem, systems perspective, GEM framework and complex theory, an integrated risk assessment model framework that is person-centric, interdisciplinary, and multidimensional (individual, firm and environment) is formulated. This was a cross-sectional, quantitative study, which followed a post-positivist approach. Primary data, with a sample size of 286, was collected from SA SMEs through self-administered questionnaires. Data analysis included correlational analysis, backward elimination method, hierarchical multiple regression and mediation analysis. Financial capital, entrepreneurial self-efficacy on growth and risk perception emerged as significant predictors of SME success. However financial capital is by far the most influential predictor of financial performance. The results also confirmed the mediating effect of financial capital between entrepreneurial self-efficacy (finance and growth) and financial performance. Entrepreneurs who are confident can raise enough capital for their businesses, thus producing successful SMEs. Government policies and support programmes need to take a holistic view when supporting SMEs. While taking a holistic view, priority needs to be put on making capital available for entrepreneurs to develop and grow their businesses. Training programmes can focus on up-skilling entrepreneurs regarding entrepreneurial tasks that can improve their self-efficacy in management, financial understanding, and growth of their businesses. The study’s findings are important in that they help funders realise that business plans and financial projections are not the most important predictors of SME success, thus the need to review current risk assessment models.Item An ICA-GARCH approach to computing portfolio VAR with applications to South African financial markets(2017) Mombeyarara, VictorThe Value-at-Risk (VaR) measurement – which is a single summary, distribution independent statistical measure of losses arising as a result of market movements – has become the market standard for measuring downside risk. There are some diverse ways to computing VaR and with this diversity comes the problem of determining which methods accurately measure and forecast Value-at-Risk. The problem is two-fold. First, what is the distribution of returns for the underlying asset? When dealing with linear financial instruments – where the relationship between the return on the financial asset and the return on the underlying is linear– we can assume normality of returns. This assumption becomes problematic for non-linear financial instruments such as options. Secondly, there are different methods of measuring the volatility of the underlying asset. These range from the univariate GARCH to the multivariate GARCH models. Recent studies have introduced the Independent Component Analysis (ICA) GARCH methodology which is aimed at computational efficiency for the multivariate GARCH methodologies. In our study, we focus on non-linear financial instruments and contribute to the body of knowledge by determining the optimal combination for the measure for volatility of the underlying (univariate-GARCH, EWMA, ICA-GARCH) and the distributional assumption of returns for the financial instrument (assumption of normality, the Johnson translation system). We use back-testing and out-of-sample tests to validate the performance of each of these combinations which give rise to six different methods for value-at-risk computations.Item Risk based pricing for unsecured lending(2015) Thoka, BoitumeloRisk based pricing has been a topic of discussion since the 2008 financial crisis as a result of the on-selling of packaged sub-prime assets. This paper will highlight the importance of correctly assessing risk within the framework of consumer credit provision. We will begin with a brief overview of the South African unsecured lending market, look into the definition of risk based pricing and the impact it has had in the market and conclude the paper by using a model by Robert Phillips to calculate the interest rate to be offered to a customer.Item The role of financial access in the success of small and medium enterprises in Swaziland(2016) Mthethwa, Zethu PrudenceMost economies today are calling upon their or rather are starting to rely on their Small and Medium business Enterprises to stimulate the economy and also help address issues of unemployment. However it is also believed that even though this maybe the case, most economies still don’t give SMEs enough funding. The underlying public assumption is that all that is needed for SMEs to thrive is access to funding, as such this study sought to investigate the role of financial access in the success of SMEs. The study had intended to use financial ratios as proxies for success, however, the record keeping of the SMEs or lack thereof impeded this intention, so the study measured the success of the enterprise as perceived by the owner. The study sampled SMEs from all for regions of Swaziland, and besides a descriptive analysis that were carried out to examine the utilization of credit by the SMEs. This study also used a statistical model known as the Logit model, to determine the effect that credit access had on the success of the SME and also assess the challenges/barriers that the SMEs faced when trying to access funding. The results of this study deviated from the underlying public assumption, as they showed that an SME owner that had access to funding had reduced odds of success, if anything the results showed that the success of an SME did not entirely depend on the availability of funding, and there were other potent factors that posed as barriers to financial access.