3. Electronic Theses and Dissertations (ETDs) - All submissions
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Item Factors that In uence illiquidity in the South African Banking Industry: Empirical Evidence of Commercial Banks(2019) Tsela, Sifiso.This paper investigates the determinants of illiquidity in the South African banking industry using listed commercial banks. We selected two theoretically established illiquidity measures and perform empirical analysis using rms spe- ci c variables and macroeconomic variables. A xed e¤ect regression model was adopted and the empirical results indicate that total cash to assets ratios and rms market size as proxy by market capitalization are the signi cant factors that in uence illiquidity in the South African banking industry. These results are consistent with the ndings in the literature. Furthermore, we nd no dif- ference between the illiquidity measures used in the study as they lead to the same conclsuion. Keywords: Commercial banks, illiquidity, rms speci c factors 2Item Liquidity and the convergence to market efficiency(2017) Young, Nicara RomiThe aim of this study is to investigate the relationship between market liquidity changes on the Johannesburg Stock Exchange (JSE), and the market’s degree of efficiency. Market efficiency is characterised in terms of two philosophies: Fama’s (1970) Efficient Markets Hypothesis, and Shiller’s (1981; 2003) informational efficiency designation. Efficiency was tested using measures of return predictability, a random walk benchmark, and price volatility; liquidity was measured using market turnover. The tests were conducted on JSE Top 40 shares across three regimes, spanning January 2012 – June 2016. The regimes are demarcated by two structural breaks in the JSE’s microstructure: the 2012 trading platform upgrade, and the 2014 colocation centre launch. The results show that past order imbalances are a significant predictor of daily returns, although the significance of this predictability has dissipated over time. Return predictability is not influenced by liquidity. In fact, there is evidence that illiquidity weakens return predictability. Prices were closer to random walk benchmarks during the third regime. In consideration of informational efficiency, during the latter two regimes price volatility is greater during trading versus non-trading hours. This is coupled with an emergence of nonlinear return dependence, which is indicative of greater mispricing. Thus, over the three regimes, market efficiency improved in the sense of the EMH, but informational efficiency deteriorated. The study contributes to the field by: introducing an inverse measure of market efficiency; providing insight into the measure’s time variation and relation to liquidity; and demonstrating that market efficiency tests should incorporate its dual meanings, enabling richer understanding of their intersection.Item Liquidity and size effects on the JSE(2017) McKane, GraemeThis study tests the efficacy of the liquidity variables of Liu (2006) in determining the existence of a liquidity premium on the South African market and finds evidence of a significant liquidity effect. This factor is determined to be robust and to proxy for a different underlying effect than the Fama-French (1992) effects and the market risk premium. The analysis is performed through portfolio sorts and tests for difference of portfolio means, as well as both a univariate and multivariate regression analysis. The sample period covers 16 years from 2000 to 2015. The relationship between size and liquidity is clear, however liquidity is found to be separate from the size effect. This study recommends the use of a liquidity-augmented model for the analysis of asset returns in South Africa.