Liquidity and size effects on the JSE
Date
2017
Authors
McKane, Graeme
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Abstract
This 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.
Description
A research report presented in partial fulfilment (50%) of the requirements for the degree of Master of Commerce in Business Economics (Finance) in the School of Economic and Business Sciences at the University of Witwatersrand, Johannesburg, 6 October 2017
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Citation
McKane, Graeme (2017) Liquidity and size effects on the JSE, University of the Witwatersrand, Johannesburg, Liquidity and size effects on the JSE,University of the Witwatersrand, Johannesburg, <http://hdl.handle.net/10539/24389>