3. Electronic Theses and Dissertations (ETDs) - All submissions
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Item Share price reaction to dividend cuts and omissions: evidence from South Africa(2020) Raedani, Phumudzo PreciousThis study examines the effects of dividend cuts and omission on the performance of South African firms listed on the Johannesburg Stock Exchange (JSE) over the sample period of 1996 and 2016. The study examines an overlooked area in dividend change studies and is motivated by the conflicting conclusions that exist in finance literature around what dividend reductions signal to the market. The study made use of a total of 94 firms which comprises both the dividend decrease and omission sample as well as the control (peer) firm sample. The study employs the event study methodology using the control firm and the capital asset pricing model (CAPM) to test for the effect of dividend cuts and omissions on the share price. The study also tests for the relationship between dividend cuts and omissions and variables such as the return on assets(ROA), the market to book ratio (M/B) and the capital expenditure (CAPEX). The study finds negative abnormal returns for both control adjusted returns and the CAPM adjusted returns. The market to book ratio results show that there is a decrease in growth prospects for both high and low market to book ratio firms. In terms of the return on asset analysis, dividend decrease sample firms were found have had poor operating performance years prior the dividend cut announcement and continued to experience poor operating performance years after the cut, suggesting that dividend decrease firms were not as profitable and hence the reason to cut dividends. The dividend decrease firms were found to increase capital expenditures even years after the dividend decrease announcement whereas the opposite was found for control firms. The overall results are consistent with international literature where changes in dividends appear to be linked to changes in future growth opportunitiesItem Target price accuracy: South African equity market(2019) Sebele, PotsoMuch that has been studied around target prices has generally revealed weak prediction ability on individual analysts’ level. In this report, we pursue an unprecedented approach and analyse consensus target price forecasting ability. Like past academic works, we conclude that, consensus target price accuracy in forecasting future market share price is inadequate, with consistent prediction errors that are fairly auto-correlated. We also discovered that target price prediction errors are correlated to earnings forecast errors suggesting that the latter is underpinned by earnings forecast. Regarding our last objective, we found out that prediction errors are positively related to implicit return, earnings per share and price per book value but negatively related to market capitalisation of companies.Item Crude oil shocks and stock returns in African stock markets.(2019) Enwereuzoh, Precious AdakuConsidering that Africa’s energy consumption per capita is growing faster than those of most continents in the world, driven by improved infrastructure and inflow of investment which have made Africa a major player in the international oil market, the need to study the impact of changes in oil prices on the stock market is of great importance. The stock Market is important as it acts as an economic barometer and reflects activities in the economy. The study investigates the impact of crude oil shocks on selected African stock markets. The countries selected are classified into two; with Nigeria, Tunisia, and Egypt as net oil-exporters, and Botswana, South Africa, Kenya, and Mauritius as Oil-importers. Using a Structural Vector Autoregressive model and a two-state regime Markov-switching framework, the study analyzed the impact of crude oil shocks on real stock returns over the period January 2000 to July 2018 at monthly frequency. Empirical findings from the study suggest that oil supply shock is statistically insignificant for most countries with the exception of Kenya; oil demand shock is positive in at least one regime for all countries and oil specific shock is statistically significant for oil-exporters with Nigeria having a negative impact on their stock returns, Tunisia having a negative and positive impact at different regime and a positive impact for Egypt. For oil-importers, oil specific shock has a positive impact on the stock returns of all countries except for Kenya. The findings from this study has important implications for investors whose portfolio may comprise of asset from African stock markets and crude oil. Given the phenomenal importance of oil in the global market one would typically avoid equities that suffer from its shock. This study provides the indicators to inform that decision.Item The impact of oil price shocks on stock market returns: Evidence from South Africa(2018) Shonhiwa, Tapiwa DennisThis paper seeks to determine whether there is any relationship between oil price shocks and the stock returns of South African firms. In recent periods, oil prices have risen significantly, and the price has been volatile. The volatility of oil price has drawn the attention of many researchers to study the impact oil supply and demand shocks on various economies. In this study shocks are split into three, namely crude oil supply shocks; shocks to the global demand for all industrial commodities; and global crude oil market demand specific, as opposed to a single oil price shock. This paper uses the vector autoregressive (VAR) model and the Vector Error Correction (VEC) models to quantify the effect of oil price shocks on South Africa’s stock returns. The primary variables used are exchange rate (USDZAR), global oil production, global oil price and the South African real stock returns. Structural shock to the exchange rate significantly explains fluctuation in the stock returns in the South African stock market case for most of the oil consuming industries. This study discovers that shocks in oil prices can be used to estimate the simultaneous relationship between stock return and stock volatility. The study points that oil price shocks are negatively related to stock returns of sectors that consume oil in their production of goods and services. However, the contribution of oil production and oil price to the fluctuation of the all share index are not quantitatively significant.Item Stealth trading on South African equities market(2019) Arumero, AshleyThe research examines if there are traders on the Johannesburg Stock Exchange (JSE) with information advantage. By employing high frequency data from 53 securities, the findings show that agents engage in small size trades to camouflage their information advantage. The inverted U-shaped plot was obtained from the dynamic probability of small trades model, which is consistent with the literature. The findings show that stealth trading is more frequent during the middle of the day on the JSE than any other time of the day. About 38% of traders were trading from an information advantage during the period of analysis. This implies that the remaining 62% of the traders engage in uninformed tradesItem Enhanced indexation of South African equities: a co-integration analysis(2017) Modungwa, Dineo NtshadiThis study presents an analysis of cointegration based tracking strategies; a classical index tracking strategy and a long-short equity market neutral tracking strategy. The first strategy attempted to track a reconstructed index, whilst the second strategy attempted to track an enhanced index. Quantitative portfolio managers have traditionally used the concept of correlation to analyse co-movements, which over years evolved into conditional correlation. In contrast, this study applied cointegration rather than correlation in portfolio optimisation. The concept of cointegration relies on the long-run relationship between time series i.e. stock prices and an index. The data that was used was the price history of the JSE Top 40 market index and its constituent stocks for the period 02/11/2009 - 31/12/2015. The study found that it was only the designed tracking portfolio of 10 stocks that was sufficiently cointegrated with the index (JSE Top 40), albeit at higher volatility at various times in the out of sample period and performance that slightly lagged the index even before accounting for transaction costs. As far as the enhanced index tracking strategy based on cointegration, the study found no convincing empirical evidence for the South African equities market. Further research should be done to test the robustness of the cointegration based index tracking strategies under different market conditions and its applicability within sophisticated trading strategies and stock selection methodologies.Item The determinants of fund performance: does size really matter in South Africa?(2018) Ramos, D.This research seeks to better understand the determinants of fund performance in a South African context. It will focus extensively on fund size, past performance, fees, and expense ratios and their relationship with performance. While other research has shown an inverse relationship between fees and performance, it seems divided on the relationship between fund size and performance in various markets. Due to the high regulatory environment, asset managers in South Africa face multiple restrictions that have limited their investible universe. The results presented in this research show that funds in South Africa exhibit the “Hot Hands” phenomenon as well as it documents the negative relationship between fees and performance for South African funds. Lastly, results show a positive relationship between fund size and performance where funds in South Africa enjoy economies of scale.Item The relationship between equity prices and financial performance of companies qouted on the Johannesburg Stock Exchange(2018) Maceke, Musa WisaniInvestors maximize their wealth by investing in the stock market. The maximization of wealth occurs when the price of a share increases overtime and gets higher than the original price that the investor paid for a share. The objective of this study is to determine the impact of the firm’s operating performance and macroeconomic factors on the share price of companies listed at Johannesburg Stock Exchange (JSE) over the period 2013 to 2017. The study use companies’ financial indicators and macroeconomic factors to determine their influence on share price. Multiple regression analysis was used to test the relationship between dependent variable and independent variables. Regression diagnostic tests were performed to check for multicollinearity and heteroscedasticity in the model. The empirical results show that there is a positive relationship between a JSE share price and return on asset, dividend per share, turnover, liquidity and earnings per share. Therefore, when these variables increase the share price also increases and vice versa. However, research also show that the share price has no significant influence on gross domestic product. The results of the study also show that there is a negative relationship between the share price and consumer price index on the JSE. Thus, when consumer price index increases, the JSE share prices decrease.Item Value stocks verses growth stocks perfromance in emerging markets(2017) Ngcongo, NokukhanyaThis thesis examines the performance of value and growth stocks during the ten year period June 2006 to 2016 within five emerging markets countries namely South Africa, Nigeria, Brazil, India and Argentina. Value stocks are those stocks that trade at low prices in comparison to its fundaments value of the company and growth stocks are those stocks that trade at high prices compared to the company’s fundaments. The portfolios of value and growth stocks are created in the five abovementioned countries. The performance of value and growth stocks are studied by constructing portfolios on the basis of price-to-earnings, price-to-book, price-to-cash flow and price-earnings-growth. The data to calculate these price-multiples are derived from the audited statement of comprehensive income, statement of financial position and statement of cash flow of the companies. Trade data on listed stock, listed indices, cash dividends and risk-free rates are derived from mainly from Bloomberg.com and Morningstar.com. To classify stocks to be included in value or growth portfolios, a 30 percent cut-off is used. The portfolio returns and risk, price-multiples are studied as well to research whether one price-multiple provide higher return than others. Total return and risk-adjusted measures are studied by means of average daily returns to scrutinize which class of stocks, value or growth, provided the highest return. A regression analysis is performed to study if the Capital Asset Pricing model and a two-factor model can elaborate on the excess returns yield by value and growth portfolios. The findings are that value stock portfolio provide a higher total return than growth stocks portfolio. The value stocks as compared to growth stocks, also provide a fraction of higher return per unit of risk, as measured by Jensen’s Alpha and Treynor. The study also shows that value portfolios classified on price-to-book yield higher returns than portfolios constructed on other price multipliers. The regression analyses show that the CAPM two-factor model is able to explain the excess returns on value and growth portfolios. The beta coefficients of value stocks are higher than growth stocks, which is consistent with the general theory that higher betas found in stocks should, by definition, produce higher returns, this also suggest that the reason behind the of outperformance by value stocks over growth stocks is a compensation of risk. While value and growth stocks are studied over a period of 10 years on five emerging markets there is some limitations and implications for future research exist. One major limitation concern is the sample size of 5 emerging markets out of 152 emerging and developing countries as listed by the International Monetary Fund. Therefore reaching statistical conclusion makes it difficult to generalize towards other countries.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 efficient