The effect of exchange rate and inflation on the stock market returns of the top mining companies in South Africa
Date
2022
Authors
Journal Title
Journal ISSN
Volume Title
Publisher
University of the Witwatersrand, Johannesburg
Abstract
This research study examines the impact of nominal Rand/USD exchange rate and inflation on the nominal stock returns of top mining companies in South Africa that are listed on the Johannesburg Stock Exchange (JSE). The selected mining companies for this study formpart of the FTSE/JSE Precious Metals and Mining Index. The relevant data was collected from Bloomberg over a ten-year period (2010 to 2020). The Johansen cointegration analysis was applied to model the long run relationship between inflation, exchange rate and stock market prices for JSE Precious Metals and Mining Index. The study outcome revealed that, in the long run, there is a negative and significant relationship between inflation and the stock market returns. Exchange rate has a negative, though insignificant, impact on the stock market returns for FTSE/JSE Precious Metals and Mining Index in the long run. The outcomes of this study pose important implications, from both a policy and practical perspective. Based on the findings, it is recommended that from a policy perspective, the inflation policy must minimise and stabilise inflation fluctuations. This will result in investor confidence and more investments can be made to revitalise the precious metals mining sector. Furthermore, the findings suggest that exchange rate should be considered at valuation to hedge against currency risk and diversify investments
Description
A research report submitted in partial fulfilment of the requirements for the degree of Master of Management in Finance and Investments Faculty of Commerce, Law and Management Wits Business School at the University of Witwatersrand, Johannesburg, 2022
Keywords
Inflation, Exchange rate, Stock returns, Platinum group metals, UCTD
Citation
Mangere, Murehwa. (2022). The effect of exchange rate and inflation on the stock market returns of the top mining companies in South Africa [Master’s dissertation, University of the Witwatersrand, Johannesburg]. WireDSpace. Valuehttps://hdl.handle.net/10539/39000