Faculty of Commerce, Law and Management (ETDs)
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Item Wavelet analysis of Stock Market trends: Investigating behavioural patterns in the Johannesburg and London Stock Markets(University of the Witswatersrand, Johannesburg, 2020) Mwenye, Ronald; Koech, RoselyneThis research explores a view that considers price index movements as a reflection of the aggregate rational and sentiment psychological elements of market agents. This perspective asserts that both psychological elements of agent rational and sentiment influence choices that drive price movements in stock markets. To investigate this behavioural link between markets and market agents, the research caries out a time series analysis of Johannesburg and London stock market trends (JSE and FSTE indexes). In examining this link using index price information, the research considers its implications on the conceptualisation of market efficiency by interrogating the very meaning of information. The research employs a Morlet continuous wavelet transform as a special form of multiresolution analysis for resolving market price signals into information patterns. The research attempts to interpret these information patterns pragmatically in terms of market agents’ beliefs about the market through a hypothesis that maps price information to liquidity and agent psychology. The study verifies the plausibility of the research hypothesis by using cross-wavelet analysis to correlate index movements and volatility. Research results appear to confirm that price index patterns represent agents’ belief in the market as an aggregate of their rational and sentiment. Wavelet analysis of the FTSE 100 index demonstrates how changes in market belief or mind-set in 2008 (the global financial crisis) and 2012 (Greece debt crisis) closely relate to its volatility measure, the VIX. The research concludes that information transparency might not be adequate to qualify market efficiency. Beyond informational transparency is a subjective element of truth that brings market beliefs forth. Studying these beliefs through market rational and sentiment patterns might be key to understanding the market landscape of the future and understanding market horizons to enable better risk-returns forecasting.Item Do stock market disruptions induced by oil price shocks affect firm-level investment in South Africa?(2021) Kyalo, PriscahVarious studies have been carried out to establish the effects of oil price shocks on various macroeconomic variables in South Africa. These have mostly focused on effects related to the cost of production. However, such studies fail to establish the particular oil shock responsible for the effects as well as the secondary effects of oil price shocks. This study examines the effects of decomposed oil price shocks on firm-level investment in South Africa when the shocks are transmitted through the stock market. The oil price shocks were disentangled into oil demand shock, supply shock and risk shock using Ready (2018) model. The generalised method of moments estimation technique was applied to South Africa firms data over the period 2000 to 2019. The investment model was estimated using Tobin’s Q theory, and augmented with alternate variables including the stock market volatility induced by the disentangled oil shocks. The findings indicate that indeed there exists an oil shock pass-through mechanism with the stock market acting as the channel of transmission. The supply shocks are negatively correlated with stock market returns, but their induced volatility is too small to significantly affect firm-level investment. The demand shocks have a positive effect on stock market returns and consequently positive and statistically significant effect on firm-level investment. Risk shocks are negatively correlated with stock market returns and have a negative and significant effect on firm-level investment. The volatility induced by the three oil shocks jointly has a positive and statistically significant effect on firm-level investment. The study revealed that the demand shocks were dominant over the sample period, hence the positive influence on firm-level investment. The results will be useful to market participants to know what to anticipate in the stock market when they are aware of the prevalent oil shock. They will also be useful to firm managers in deciding on proper timing of investment as well as to policy makersItem Stock market effects of the 2015 presidential election in Tanzania(2021) Masima, Nyangwe JobIn this study we analyse for the first time the impact of the 2015 presidential elections on the returns of the Dar Es Salaam Stock Market. A wide range of studies have been conducted on the impact of presidential elections on stock market returns of many countries. Most of these studies have been piloted in developed nations, very little in Africa and no known study in Tanzania. This study provides new knowledge on these fronts for the finance literature in Africa, developing markets and Tanzania. The study was based on event study methodology and employed the market model to estimate the expected return, consequently leading to the computation of abnormal returns. The event days were the 12th July 2015 (nomination day) and 29th October 2015 (election day). Furthermore, a robustness of event study was conducted by testing for structural breaks to determine exogenous dates to confirm event dates assumed at the beginning of the study. A variety of GARCH models were further used to test for the effect of the presidential elections on the returns of the DSE. The graphic representation of the Dar Es Salaam stock market from the period 4th January 2010 to 30th December 2019 indicated an increase in volatility clustering over time compared to period before 2014; highly volatile markets lower investor confidence. Different patterns of abnormal returns were observed for both nomination and election period. The NP10 test indicated negative averages during the break and post break period while positive returns were observed during the pre break period. It is not unusual for this to happen during a period of structural break, but that it continues after, implies that the market is still reeling of the uncertainties generated by the Presidential election activities. The empirical findings showed that the 2015 presidential elections had an impact and sticky effect on the returns of the Dar Es Salaam Stock Market. The study recommends that investors investing on the Dar Es Salaam stock market should carefully plan and carry out investments decisions during and after the period of general elections as returns could be affected either positively or negatively during this period