Efficacy of following directors dealings
| dc.contributor.author | Heasman, Lael | |
| dc.date.accessioned | 2014-07-22T12:36:24Z | |
| dc.date.available | 2014-07-22T12:36:24Z | |
| dc.date.issued | 2014-07-22 | |
| dc.description | MBA Thesis 2011 | en_ZA |
| dc.description.abstract | ABSTRACT The purpose of this research report was to explore the efficacy of following directors‟ dealings. More specifically it tried to establish whether an outside investor could build a long term and profitable trading strategy on the JSE Securities Exchange South Africa (JSE) by trading only on receipt of an intense directors‟ dealing signal as the key strategy driver. Directors of companies on the JSE are obliged by regulation to report dealings in the shares of their own companies to the JSE. The theory is that directors have information which is not necessarily publicly available, against which they could trade in order to profit. If this is the case then an outside investor should also be able to profit when trading in line with this director activity. This report uses an alternative approach to the commonly used event study methodology. It instead uses a performance evaluation method on constructed portfolios to arrive at a result. The data used for this research included all dealings by directors from the Top 40 companies as listed on the JSE Main Board, between 2nd October 2000 and June 30th 2009, as announced through the JSE SENS service. The findings initially looked astoundingly positive with a 595.43% return over the study period when acting on signals embedded in directors‟ dealings, as identified by the proposed Outsider Portfolio Strategy. This translated to a 27.4% annual compounded return which is significant return on investment by any standards. It also ranked in the 95.8 percentile against 20,000 randomly generated portfolios which added further weight to the initial positive response. However, on investigation of the internal structure of that return, it was discovered that 36% of the return came from only one of the fifteen shares that triggered signals. Investigating that share, and others that delivered return, no correlation what-so-ever could be found between the periods of high performance for the shares, and the periods for which the Outsider Portfolio Strategy required the outside investor to be invested in those shares. As such the findings remain inconclusive and further investigation and research is recommended before any conclusive finding can be reached. | en_ZA |
| dc.identifier.uri | http://hdl.handle.net/10539/14961 | |
| dc.language.iso | en | en_ZA |
| dc.subject | Stocks -- Prices -- South Africa. | en_ZA |
| dc.subject | Johannesburg Stock Exchange. | en_ZA |
| dc.subject | Portfolio management -- South Africa. | en_ZA |
| dc.subject | Directors of corporations -- South Africa. | en_ZA |
| dc.title | Efficacy of following directors dealings | en_ZA |
| dc.type | Thesis | en_ZA |