The relationship between style indices
Date
2011-04-12
Authors
Flemmer, Anthony
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Abstract
Style indices can be created for any investment style by calculating the
weighted average performance of the shares that form part of a particular style,
be these value, growth, large, small, etcetera. This study investigated the
relationship between such indices and their underlying shares.
The strength and persistence of the relationship between style indices and their
underlying shares over a period was determined. The predictive power of these
indices in selecting shares for a portfolio was established.
This research suggested that the JSE Securities Exchange does not constitute
a strong form of Efficient Market Hypothesis and therefore it is possible to
exploit these inefficiencies. It also highlighted the fact that the market has not
become more efficient in recent years and thus knowledgeable investors can
continue to exploit it.
The research has shown that style indices can be used as lead indicators for
share selection on the JSE Securities Exchange. Investors are recommended to
use style indices to help inform them when making investment decisions.
Description
MBA - WBS
Keywords
Style indices, Johannesburg Securities Exchange, Shares