Includes bibliographical references / This study examines a multifactor model of the Johannesburg Stock Exchange (JSE) framed within the Arbitrage Pricing Theory (APT). The APT has been set up such that it can be able to separate the beta for the precious metal factor within the model. The process goes via the investigation of macrovariables (with precious metals used as one of the macrovariables) and their effect on market (JSE) returns. A complete analysis and modeling of this relationship is likely to yield unparalleled rewards and cost-effective risk management, monitoring and mitigation. Using monthly data for the period 31/07/2002 to 30/04/2013 the dissertation focuse d on using a market (JSE) representative index as a basis for creating a wholly functioning APT model. This included creating a more liquid representative of the JSE All Share Index (A LSI) by using the top 100 stocks by market capitalization. Principal Components Analysis (PCA) was applied to the variables to ascertain a proper model for the JSE return structure. However, in the end an appropriate econometric structure in the form of Autoregressive Conditional Heteroscedastic (ARCH) and Generalized Autoregressive Conditional Heteroscedastic (GARCH) models was used and applied to test and create the APT model to address the objective. The other purpose of this dissertation was to separate beta attributable to the precious metal macrovariable within the model. This is based on the establishment of the JSE in the late 1880s being primarily due to the discovery of precious metals in the former Transvaal (North West) and Pretoria, Witwatersrand and Vereeniging (PWV) region now Gauteng. This is to ascertain whether these metals still have as much influence on the JSE as they did for over half a century. The results show that macroeconomic variables do influence the return generating process of the JSE, explaining almost 80% of variation in returns. The results show that the ALSI is characterized by a seven factor APT with, industrial production, money supply, SA consumer price index, ZARUSD exchange rate, crude oil, MSCI ACWI and precious metals statistically significant.

The maintenance of asset quality, efficiency and profitability is a vital requirement for the survival and development of banks. Loans are the main asset class from which banks generate their major portion of income and also signify the greatest risk to banks. There has been significant indication that the financial crises in the USA, Sub-Saharan Africa and East Asia were signalled by high levels of non-performing loans (NPLs). Due to the detrimental effect that these loans have on a bank's revenue and the economic welfare of a country, it is essential to examine and investigate the determinants of NPLs in the banking industry of any country. This study examines Botswana, a developing country in Southern-Africa and is stimulated by the assumption that both the industry level variables and macroeconomic variables have an effect on NPLs. Secondary data of the banking sector was obtained from Botswana's central bank, the Bank of Botswana. Correlation and regression analysis were carried out over a period of ten years (2005-2014), using quarterly data. It was found that the following industry level variables (i.e. credit growth, industry size and profitability) and macroeconomic variables (i.e. real gross domestic product (GDP) growth, inflation, real interest rates and the unemployment rate) have a statistically significant impact on the NPL rate. On the other hand, capitalization and diversification had a statistically insignificant relationship with NPLs. The banking industry in Botswana should carefully monitor the household loan portfolio as well as their credit advancement policies with regard to the aforementioned variables to help lower their NPL ratios. This study is the first of its kind in the Botswana banking industry and therefore will provide scholars with the opportunity to enrich their knowledge and serve as a reference for other researchers in the related area while also providing a foundation for further studies.

The ability of active managers to produce consistent benchmark-beating returns is a topic that has been widely debated with increasing interest over the past decade. The majority of previous studies in which persistence of performance is tested consider a fund's ability to maintain its relative ranking over various time periods amongst its peer group. This study adds to the literature by considering the persistence of alpha, where alpha is defined as the out- or under-performance of a market-related benchmark. Persistence of alpha for South African general equity unit trusts is tested over six-month, one-, two- and three-year formation and holding periods using a similar methodology to that of Collinet & Firer (2003). Alpha is found to persist most prominently in tests of one-year periods, with other period lengths yielding less significant results. Additionally, using the methodology of Malkiel (1995), certain funds which have demonstrated statistically significant persistent alpha over various periods are identified.

The financial crises of 2008 increased the focus around financial distress and even more so on predicting financially distressed companies prior to the fact. This research paper investigates using recursive partitioning to predict financially distressed companies on the Johannesburg Stock Exchange, taking different business cycle periods into account over the time period 1997-2014. The updated as well as longer time period over which the analysis is conducted distinguishes this research paper from prior research. This paper employs both the CART and CHAID algorithm and obtains financially distressed prediction models which have a higher correct classification rate than chance alone and prior literature in South Africa. This paper also makes use of a matched data sample approach and the manner in which missing data is addressed makes a valuable contribution to financial distress prediction research. Furthermore, support is found for prior literature in that financial variables are statistically significant in predicting financial distress.

This study investigates the effect that announcements of rights issues have on abnormal share price returns on the JSE over the period January 2009 to December 2014. This study will focus specifically on the equity element of the capital structure and the issuing of new equity in the form of rights issues. There have been a few studies done in this regard in the South African context but the prior papers have been conducted over significantly different time periods and data samples and there is therefore merit in combining all four approaches into a single study focused on one consistent data sample. Secondly, this study also investigates the impact the motivation for the rights issue as provided by the issuer, has on the share price returns of the issuers. Thirdly, this study investigates the effect of the "financial health" of the rights issuer, as measured in terms of the Altman Z-score, has on the abnormal returns of the share prices of the issuers. The final area of investigation is to test the ability of rights issuers on the JSE to time the market when performing rights issues.

This paper aims to investigate the change in corporate debt levels in South Africa from 1994 to 2016 as well as analyse certain factors that play a role in the decision making of corporates when it comes to the all important decision of capital structure. The study uses data from large capitalisation, retail and food producing firms listed on the Johannesburg Stock Exchange. Four different leverage measures are used to determine the change in capital structure over the period under review as well as six of the most common determinants of capital structure used in literature. The analysis shows that South African corporates have drastically increased their appetite for debt funding compared to equity funding over the last two decades. Large capitalisation stocks reflected the largest increase in the use of debt, whilst food producers showed the smallest yet still significant increase in debt. Analysis has also shown that firms have changed their maturity profile of their debt significantly since the 2008 financial crises. Results from the analysis on determinants varied with some determinants showing statistical significance.

Using a Principal Component Analysis (PCA) approach, we investigate the sovereign yield spread term structure of the BRICS economies against the U.S. We show that the term structure for these markets are primarily driven by three latent factors which can be classified as the spread level, slope and curvature factors. We further postulate that a country’s yield curve contains valuable information about its future economic state and as such the PCA derived spread factors, which are based on the differences between sovereign yield curves, encapsulates material macro-economic information between the countries. In light of this, we show that augmenting the traditional Uncovered Interest Rate Parity model (UIRP) with these factors improves the models predictive accuracy of exchange rate movements.

In this study it was examined whether Pairs trading is a potentially profitable trading strategy on the Johannesburg Stock Exchange. Pairs trading is a quantitative based trading strategy, in which shares are paired up based on a historic price relationship and traded accordingly, in a contrarian manner, when they diverge from said historical relationship. The essence of Pairs trading is to take advantage of perceived market inefficiencies, which is a direct contradiction of the Efficient Markets Hypothesis (even in its weak form). This study tested Pairs trading on both an unrestricted (any two shares can be paired), as well as a sector-restricted (only pairs within the RESI and the FINDI sectors could be paired), sample of shares (the JSE Top80 - based on market capitalization). Furthermore, a number of different signals (which are based on standard deviations) to open and close pairs were tested, on both the unrestricted and sector-restricted samples. The aim of using different samples of shares, as well as different trading signals, was to determine whether or not different strategies could serve to bolster the performance of a Pairs trading strategy.

Most investors would want to know what is included in the price of a share and how far accounting data explain the share price. This study uses the most common measures of financial performance to measure what is explained by the share price. Most analyst briefings use these financial performance measures: book value per share, cash flow per share, earnings per share and most recently the market performance measure, the economic value added (EVA) in the share valuations. The objective of the study is to examine the relationship between the above measures of financial performance as presented in financial statements and the share prices and share returns. If there is a relationship, which measure is most closely related to both share prices and share returns? The study uses data obtained from a balanced sample of 87 companies listed on the Johannesburg Stock Exchange (JSE) during the ten-year period (2005-2014). Both the price and the returns models were used to analyse this financial data to find out which accounting measure has the greatest explanatory power on the share prices and share returns (measured by the R-squared or R 2metric). For the price model, share prices 3 months after the financial yearend were used to allow for the release of financial information. Using the price model, earnings have the highest overall R2 at 56.4%, with book values at 18.4%, EVA at 2.18% and lastly operating cash flows at 1.18%. This effectively means that earnings per share is more value relevant in determining firm value than either book value of equity, EVA and operating cash flows, respectively. Using incremental value relevance, equity book values and earnings explain 65% of the share prices. However, changes in EVA deflated by price have the greatest explanatory power (R 2 at 30%) using the returns model and none of the other measures(earnings and operating cash flows) have a significant relationship with share returns. Overall the results show that both accounting based (book value of equity and earnings) and market based measures (EVA) are value relevant in determining firm value. The results also show that a consideration of more than one variable in determining firm value is more informative than considering each variable separately. EVA should also be used in determining value as it has shown that it explains some of the share prices and returns.

The Mineral and Petroleum Resources Development Amendment Bill has drawn criticism from industry experts and the press. There are a number of amendments that could be damaging to future investment in South Africa's upstream oil and gas industry. This study examines the key changes brought about by the Bill, South Africa's fiscal terms, how the fiscal terms are impacted by the Bill and current activity in South Africa's upstream oil and gas sector. The report then focuses on the most significant change made by the Bill, which is the level of State Participation. A fit for purpose economic model was built and the resulting cash flows were used to calculate the economic indicators presented in the results. The results from the model indicate how the increase in State Participation levels affects the ranking of South Africa's fiscal terms and the profitability of hypothetical investment opportunities. When ranked on fiscal terms, the country moves from having some of the best terms in Africa without the new Bill, to a position where the fiscal terms can be described as average or even onerous, depending on the interpretation of the State Participation clause. Accordingly, the result of the hypothetical investment opportunity has very positive economic indicators without the changes from the new Bill. If the most optimistic interpretation of the State Participation clause is modelled, the opportunity is less attractive but still viable and if the most pessimistic interpretation is modelled, the opportunity would not warrant investment. Even though South Africa has limited reserves, significant exploration activity is taking place under the existing legal and fiscal framework. If the Bill is implemented in its current format, it is likely that the country will see a significant decline in investment in the upstream oil and gas industry. Attracting new investment by international oil and gas companies in an environment governed by the terms of the proposed Bill will be challenging.