Wits Business School (ETDs)

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    Prediction of Equity Mutual Fund Performance in South Africa using Regression Modelling
    (University of the Witwatersrand, Johannesburg, 2023) Kekana, Thabo; Dladla, P.
    Studies have found that mutual funds tend to underperform the relevant benchmark index in the long term. The failure to outperform the index may be partly attributed to the fund managers’ lack of tools that may assist in providing reliable estimates of how the funds are likely perform. The study uses a sample of nine South African equity mutual funds to test the predictive ability of linear and support vector regression models in predicting future mutual fund performance. Fund-specific and macroeconomic variables were used as predictor variables for predicting the year-to- date performance of the fund . The results of the study indicate that based on RMSE, support vector regression outperforms the linear regression models in predicting mutual fund performance and fund-specific and macroeconomic factors may be considered as predictor variables for fund performance
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    Testing assets pricing models on Africa’s mutual fund industry
    (University of the Witwatersrand, Johannesburg, 2022) Moola, Ahmed; Kodongo, Odongo
    This paper concentrates on testing various asset pricing models on mutual fund returns in six African countries. The various asset pricing models include the CAPM, the Fama-French threefactor model, the Carhart four-factor model, the Fama-French five-factor model and the FamaFrench six-factor model. The models performances were evaluated using a range of performance measures and the best performing asset pricing model was identified in each country as well as across the African mutual fund industry as a whole. With the CAPM being deemed as unable to fully explain returns, it led to the development of new models including more factors that were thought to be vital in explaining returns. The top performing asset pricing model across the African mutual fund industry is the FamaFrench five-factor model as it outperforms both the CAPM and the Fama-French three-factor model. Diving deeper and looking at the performances of the models in each country, the results tend to differ. For South Africa, different models outperform the others across the different metrics, however, for the remaining sample countries, the Fama-French five-factor model outperforms the other models across most performance measures. Across all countries, except South Africa, the profitability factor, RMW, is the only nonredundant factor. All the other factors jointly explain one another. For South Africa, the momentum factor is non-redundant for both the Carhart four-factor model and the FamaFrench six-factor model.
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    The volatility factor and the alpha of hedge funds and mutual funds in South Africa
    (2020) Sanyangare, Onaindini
    Performance measures based on CAPM, such as Jensen's (1968) alpha, with alpha measuring the value addition or outperformance by portfolio fund managers relative to the market or comparable benchmarks, have been used to measure or assess portfolio manager skill or performance. Assessing fund manager performance is crucial to the investment process, and it assists with decision making (Andrew, 2014). Research is limited when looking at the South African context and considering the performance of both fund management sectors while incorporating the low volatility-anomaly. This study sought to determine if volatility is priced in the South African hedge funds and mutual funds. This was achieved through the application of multifactor asset pricing models and Jensen’s Alpha. Some perivious stduies have identified this anomaly and found that portfolios with low volatility of returns outperformed their significant-high volatility counterparts. This study uses the Carhart (1997) model and the Fung and Heish (2001) models augmented for volatility to determine if volatility is indeed priced in South Africa’s mutual fudns and hedge funds. First, the hedge fund and unit trust returns were modelled without the volatility factor, and secondly, the returns were modelled factoring in the volatility factor. This was done to demystify the impact of the inclusion of the volatility factor, particularly to the alphas, and to separately capture the impact of the volatility factor on the overall returns of the unit trusts and hedge funds in South Africa. Although insignificant in most of the models, the inclusion of the volatility factor did improve the explanatory power of the models.