Faculty of Commerce, Law and Management

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    Extreme returns and corresponding events for JSE indices
    (2012-12-04) Wright, Sarah Nicole
    This research investigated the identification of short-term extreme returns on the Johannesburg Stock Exchange (JSE) and their corresponding events. The identification of the short-term extreme returns was accomplished through the method of uniform reduction, allowing the dates of the extreme returns to be detected through a probabilistic analysis. A qualitative content analysis was performed, utilising two major South African newspapers, to establish what events could have caused the extreme returns. The analysis was performed for four major indices over a 10-11 year period. The research showed that the JSE was affected by both local and international events. Major events such as the September 11 Terrorist Attacks, the Global Financial Crisis and the South African Power Crisis were identified as well as local events relating to interest rates, the release of economic data, monetary policy, and specific domestic political events. The context or environment in which an event occurs was found to be significant in determining the market reaction. The methodology utilised proved to be both effective and robust, but due to its exploratory and pioneering nature, still needs some refinement.
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    Size- and Book-to-Market Anomalies on the JSE – Testing for the effect of market condition
    (2011-11-11) Gudde, Christian Rudolf
    The aim of market investors is to maximise their returns from the market. Often they do this by the use of historical financial (and other relevant) information about companies and their share prices. The search for arbitrage opportunities has led to the identification of anomalies such as the size and book-to-market effects but very little research has gone into the changing of these effects over time. They have generally only been identified over long time periods on markets around the world. This investigation used the returns of portfolios based on market capitalisation or book-to-market ratio (or both) and regression analyses at specific dates at which the market conditions changed from those of a bull market to those of a bear market. This study has shown that magnitude and direction of the size and book-to-market effects change over time and that the market condition (bull or bear) is not a direct indicator of the state of the effect, although it does seem to suggest a lagged impact. The research suggests that there are significant and exploitable differences in portfolios chosen along the lines of market capitalisation or value indicators. Though no causal relationship for the existence of these anomalies has yet been identified, it seems that bear-market conditions have an impact on the magnitude (and direction) of anomalies. Since this impact continues to be seen after the bear markets, this knowledge could be exploited to reduce losses (by disinvesting in stocks that are likely to yield worse results) or even increase gains in portfolios depending on prevailing market conditions