Thesis (MBA)--Stellenbosch University, 2000. / ENGLISH ABSTRACT: The relationship between asset markets and economic growth is well documented in economic literature. Harvey (1989), conducted a study of the relationship between interest rate spreads, share market prices and real economic growth in the USA. He developed a model to forecast real economic growth using interest rate spreads and share market prices and concluded that interest rate spreads produced superior forecasts to those based on share market information. He further established that the forecasts obtained from his simple model, which made no provision for serial correlation, compared favourably with those of leading economic forecasters in the USA. Van der Mescht (1991) undertook a similar study based on interest rate spreads and share market prices in South Africa. He concluded that there were no significant differences between the capital market and share market as predictors of economic growth in South Africa when provision was made in Harvey's model for the effects of serial correlation. His results indicated that both the capital and share markets were able to explain more than 65 percent of the variation in economic growth over the period of his study and that the forecasts were able to accurately predict the turning points in the economy and compared favourably with other leading economic forecasters. A similar study to Van der Mescht's using updated South African data found that in general the conclusions reached by Van der Mescht remain valid. A difference which is evident, however, is that, whereas previously, there was little difference between the results of the interest rate spread and share market index model, the interest rate spread model produced better results over the period of this study (1981 - 1998). / AFRIKAANSE OPSOMMING: Die verwantskap tussen die kapitaal- en aandelemark en ekonomiese groei is deeglik in die ekonomiese literatuur ge-dokumenteer. Harvey (1989) het navorsing gedoen oor die verwantskap tussen die termynstruktuur van rentekoerse, aandelepryse en reële ekonomiese groei in die VSA. Hy het 'n vooruitskattingsmodel ontwikkel vir ekonomiese groei, gebaseer op die termynstruktuur van rentekoerse en aandelepryse en het tot die gevolgtrekking gekom dat die termynstruktuur van rentekoerse 'n beter vooruitskatter van ekonomiese groei is as die aandelemark, en dat sy model, wat geen voorsiening vir outokorrelasie maak nie, goed vergelyk met ander ekonometriese modelle wat ekonomiese groei in die VSA vooruitskat. Van der Mescht (1991) het 'n soortgelyke studie, gebaseer op die termynstruktuur van rentekoerse en aandelepyse in Suid Afrika, onderneem. Hy het tot die gevolgtrekking gekom dat daar geen betekenisvolle verskil is tussen die kapitaal en aandelemark as vooruitskatters van ekonomiese groei indien daar vir outokorrelasie in die modelle voorsiening gemaak word nie. Sy resultate dui aan dat die kapitaal- en aandelemark meer as 65 persent van die persentasieverandering in die ekonomiese groei kon verklaar oor die termyn van sy studie, dat dit akkurate vooruitskattings van die draaipunte in die Suid Afrikaanse ekonomie gelewer het, en dat dit gunstig vergelyk met ander ekonomiese vooruitskatters. 'n Soortgelyke studie as die van Van der Mescht is onderneem, met die jongste inligting omtrent termynstruktuur van rentekoerse en aandelepryse in Suid Afrika. In die algemeen is die gevolgtrekkings van Van der Mescht steeds van toepassing. Daar is egter aangetoon dat, waar daar voorheen geen betekenisvolle verskil tussen die kapitaal- en aandelemark as vooruitskatters van ekonomiese groei was nie, die termynstruktuur van rentekoerse beter resultate oor die termyn van hierdie studie gelewer het. (1981 -1998).

Thesis (MBA (Business Management))--University of Stellenbosch, 2009. / ENGLISH ABSTRACT: Experimental research in psychology and economics indicates that depression causes heightened risk aversion. Previous research has documented robust links between seasonal variation in length of day, seasonal depression (known as seasonal affective disorder, or SAD), risk aversion and stock market returns. One such study provides international evidence that stock market returns vary seasonally with the length of the day, a result called the SAD effect. Stock returns are shown to be significantly related to the amount of daylight throughout the autumn and winter. Another study examines the SAD effect in the context of an equilibrium asset pricing model to determine whether the seasonality can be explained using a conditional version of the capital asset pricing model (CAPM) that allows the price of risk to vary over time. Given the above as the base departure point, this report analyses the SAD effect in the context of the South African capital market, where, firstly, the variation in length of day during the year is not so severe compared with other countries like Sweden and the UK and, secondly, a more recent dataset includes the effects of integrated markets and globalisation, that possibly resulted in a shift of seasonal behaviour in the market. It quantifies the SAD effect in general, across industry sectors, over time periods and confirms that a conditional CAPM holds in explaining the seasonality due to SAD. The results differ substantially from those of prior studies. The expected signs of the SAD and Aut coefficients are reversed. Closer analysis shows that seasonality in stock returns has undergone a shift compared to seasonality in an older dataset. A prior finding that effects, such as the SAD, are better explained using excess returns than using raw total returns of the market, is reinforced. The analysis of SAD over time sheds some light on the unexpected outcome of the SAD and Aut coefficients by providing evidence that the validity of regression models deteriorated over time and, more conclusively, that in two consecutive periods, the SAD and Aut coefficients decreased in absolute value. It also found that the coefficients are linearly related to excess returns during the latter period only. The conditional CAPM provides evidence that the effect of SAD is captured in the time variation in the price of risk. The factor of reducing the remainder of SAD in error terms is, however, remarkably smaller. The implication is that market risk already accounts for the SAD effect, but only to a degree, and that the remaining contribution of the SAD effect contained in varying the price of risk is substantially less significant. This finding coupled with the contradictory results in the signs of SAD and Aut coefficients renders evidence of SAD in the South African market rather inconclusive. / AFRIKAANSE OPSOMMING: Navorsing in die gebied waar sielkunde en ekonomie oorvleuel, toon dat depressie ‘n verlaagde risiko-aptyt meebring. Meer spesifiek, vorige navorsing dokumenteer dat robuuste skakels tussen seisoenale lengtes van dae, seisoenale depressie (beter bekend as winter depressie), risiko-aptyt en opbrengste op die andelebeurs bestaan. Een van hierdie studies, wat uitgevooer was op ’n aantal hoof internasionale markte, bevind dat opbrengste op die aandelebeurse wel seisoenaal varieer in ooreenstemming met die lengtes van dae. In dié studie word daar getoon dat opbrengste noemenswaardig ooreenstem met die hoeveelheid sonlig gedurende herfs en winter. ’n Ander studie bestudeer weer seisoenale depressie in konteks met ’n ekwilibrium kapitaal-bate prysmodel om vas te stel of seisoenaliteit verklaar kan word deur ’n kondisionele weergawe van hierdie model waar die prys van risiko varieer oor tyd. Met bogenoemde as vertrekpunt, analiseer die verslag wat volg winterdepressie in die Suid-Afrikaanse aandelemark waar, eerstens, die variasie in lengtes van dae gedurende die jaar minder is as vir ander lande soos Swede en Engeland, en tweedens, waar ’n meer onlangse datastel die effekte van geintegreerde markte en globalisasie insluit. Die verslag kwantifiseer seisoenale depressie in die algemeen op die effektebeurs, pas dan regressie-modelle toe op verskeie industrie-sektore en oor verskillende periodes. Ten einde, word bevestig dat ’n kondisionele kapitaal-bate prysmodel seisoenaliteit as gevolg van winterdepressie kan verklaar. Vergeleke met vorige studies, word daar teenstrydighede in die resultate opgemerk ten opsigte van die verwagte tekens van die koeffisiënte. Met nadere ondersoek word bevind dat die seisoenaliteit in opbrengste ’n verskuiwing ondergaan het vergeleke met ’n ouer datastel. ’n Vorige bevinding dat faktore, tipies soos seisoenale depressie, beter verklaar kan word deur alpha opbrengste (risiko vrye obrengste afgetrek) as rou opbrengste, word bevestig. Die analise oor tyd verklaar gedeeltelik die onverwagte koeëfisiënte. Daar word waargeneem dat die geldigheid van regressie modelle oor twee opeenvolgende tydperke verswak het. Verder word daar ook bevind dat die absolute waardes van die koeëfisiënte verklein het en dat koeëfisiënte ’n liniêre verwantskap met opbrengste toon, slegs in die latere tydperk. Die toepassing van ‘n kondisionele kapitaal-bate prysmodel bevestig dat seisoenale depressie teenwoordig is in die prys van risiko. Daar word verder bevestig dat mark risiko gedeeltelik seisoenale depressie verklaar en dat die oorblywende teenwoordigheid daarvan in die prys van risiko heelwat minder statistiese geldigheid het. Gegewe dit, tesame met die teenstrydigheid in die tekens van die koeëfisiënte, word enige duidelike konklusies ten opsigte van seisoenale depressie se teenwoordigheid in die Suid-Afrikaanse mark verhoed.

Thesis (MBA)--Stellenbosch University, 2001. / ENGLISH ABSTRACT: Much research effort has been spent over the past few decades in the field of capital market analysis and modelling. This research was mostly based on static linear models or derivatives thereof such as the Efficient Market Hypothesis, the Capital Asset Pricing Model and the Arbitrage Pricing Theory. This study project takes an interesting look at a contemporary capital market hypothesis, which is fundamentally based on a non-linear statistical model. The Coherent Market Hypothesis (CMH) was first formulated by Tonis Vaga in 1990. It is based on a theory of social imitation, taking factors such as the underlying fundamental situation and the level of crowd behaviour into account. It also includes the phenomenon of “random walk” as a special case. The CMH departs from the premise of rational investors and normally distributed share returns. In turn, it offers a series of “market states” ranging from trendless (random walk), through unstable transition into coherent bull or bear phases and ultimately into periods of chaotic fluctuation (panics and crashes). The CMH is mathematically formulated and therefore it offers many opportunities for experimentation. This study project is an investigation of the validity and application of the CMH using real JSE data. Artificial Neural Networks were applied as computational aids. The main objective was to demonstrate the CMH’s usefulness as a forecasting tool in both a quantitative as well as qualitative capacity. The results of the quantitative analysis were not as significant or valuable as initially expected. However, the usefulness of the CMH was demonstrated in a more qualitative sense. It is shown that the CMH offers a rich theoretical framework for interpretation, understanding and recognising of market dynamics. / AFRIKAANSE OPSOMMING: Gedurende die afgelope paar dekades is aansienlike hoeveelhede navorsing gedoen in die veld van kapitaalmark analise en modellering. Hierdie navorsing was hoofsaaklik gebaseer op statiese, lineêre modelle of afgeleides daarvan, naamlik die Efficient Market Hypothesis, die Capital Asset Pricing Model en die Arbitrage Pricing Theory. Hierdie werkstuk kyk vanuit ‘n interessante oogpunt na ‘n meer hedendaagse kapitaalmark hipotese wat fundamenteel gebaseer is op ‘n nie-lineêre statistiese model. Die Coherent Market Hypothesis (CMH) is oorspronklik geformuleer deur Tonis Vaga in 1990. Dit is gebaseer op ‘n teorie van sosiale nabootsing en dit neem faktore in ag soos die onderliggende fundamentele situasie asook die vlak van groepgedrag. Die verskynsel van “random walk” word ook ingesluit as ‘n spesiale geval. Die CMH wyk af van die aanname dat beleggers rasioneel optree asook van die aanname dat aandeel opbrengste normaal verspreid is. In teendeel, die CMH omvat ‘n reeks marktoestande wat wissel van die tendenslose (random walk) deur onstabiele oorgang na koherente bul- of beerfases en uiteindelik in tydperke van chaotiese skommelings (markineenstortings). Die CMH is wiskundig geformuleer en daarom bied dit vele geleenthede ten opsigte van eksperimentering. Hierdie werkstuk is ‘n ondersoek na die geldigheid en toepassing van die CMH met die gebruik van JSE aandeledata. Kunsmatige Neurale Netwerke is gebruik as berekeningshulpmiddels. Die hoofoogmerk was om die bruikbaarheid van die CMH as voorspellingshulpmiddel te demonstreer in beide ‘n kwantitatiewe sowel as kwalitatiewe opsig. Die resultate van die kwantitatiewe analise was nie so beduidend as aanvanklik verwag nie. Die bruikbaarheid van die CMH was wel gedemonstreer in ‘n meer kwalitatiewe opsig. Dit is ook aangetoon dat die CMH ‘n omvangryke teoretiese raamwerk bied vir die interpretasie, begrip en uitkenning van markdinamika.

The current study examines the extent and magnitude by which global and regional shocks are transmitted to the volatility of returns in the stock markets of South Africa, Egypt, Nigeria, Botswana, Mauritius and Egypt. This is done so as to make inferences on the level of the domestic market‟s integration into the regional and world capital markets. By applying multivariate and univariate GARCH models, using weekly data from June 1995 to May 2010, the main empirical findings are threefold. Firstly, the volatility analytical framework finds statistically significant and time-varying volatility spillover effects from the regional and global markets to the South African market. Global shocks are generally stronger and account for up to 23.9 percent of the volatility of South Africa‟s equity market compared to weaker regional factors which account for less than 1 percent of domestic variance. Only in countries with strong bilateral trade and economic links with South Africa, such as Botswana and Namibia, is it found that regional factors are more dominant than global factors for domestic volatility. Compared to the other African markets, the joint influence of foreign shocks on domestic volatility is highest in South Africa and Egypt, two of Africa‟s largest and most developed markets. The results further demonstrate that for all the African markets the explanatory power of both regional and global factors for domestic volatility is not constant over time and tends to increase during turbulent market periods. Secondly, the analysis of the determinants of South frica‟s second moment linkages with the global market suggests that the volatility of the exchange rate plays a cardinal role in influencing the magnitude by which global shocks affect domestic volatility. The increased global integration in the second moments cannot be attributed to either increased trade integration, convergence in inflation rates or to convergence in interest rates between South Africa and the global markets. Lastly, tests were conducted to examine whether there have been contagion effects from the regional and global markets to South Africa from the 1997 Asian crisis and the 2007/8 global financial crisis. The results show no evidence of contagion during either the East Asian currency crisis or the recent global financial crisis to South Africa, while some African markets, such as Egypt, Mauritius and Botswana, exhibit contagion effects from either crisis. Overall, the empirical findings generally support the view that African markets are segmented both at the regional and global levels as domestic volatility is more influenced by local idiosyncratic shocks (the proportion not attributable to either global and regional factors). However, the volatility of South Africa, and to a lesser extent Egypt, remains relatively more open to global influence. This implies that the potential for gains from international portfolio diversification and the scope for success of policies aimed at the stabilisation of equity markets in these markets exist.

The study investigates whether the main capital market theories and pricing models provide a reasonably accurate description of the working and efficiency of capital markets, of the pricing of shares and options and the effect the risk/return relationship has on investor behaviour. The capital market theories and pricing models included in the study are Portfolio Theory, the Efficient Market Hypothesis (EMH), the Capital Asset Pricing Model (CAPM), the Arbitrage Pricing Theory (APT), Options Theory and the BlackScholes (8-S) Option Pricing Model. The main conclusion of the study is that the main capital market theories and pricing models, as reviewed in the study, do provide a reasonably accurate description of reality, but a number of anomalies and controversial issues still need to be resolved. The main recommendation of the study is that research into these theories and models should continue unabated, while the specific recommendations in a South African context are the following: ( 1) the benefits of global diversification for South African investors should continue to be investigated; (2) the level and degree of efficiency of the JSE Securities Exchange SA (JSE) should continue to be monitored, and it should be established whether alternative theories to the EMH provide complementary or better descriptions of the efficiency of the South African market; (3) both the CAPM and the APT should continue to be tested, both individually and jointly, in order to better understand the pricing mechanism of, and risk/return relationship on the JSE; (4) much South African research still needs to be conducted on the efficiency of the relatively new options market and the application of the B-S Option Pricing Model under South African conditions. / Financial Accounting / M. Com. (Accounting)

The study investigates whether the main capital market theories and pricing models provide a reasonably accurate description of the working and efficiency of capital markets, of the pricing of shares and options and the effect the risk/return relationship has on investor behaviour. The capital market theories and pricing models included in the study are Portfolio Theory, the Efficient Market Hypothesis (EMH), the Capital Asset Pricing Model (CAPM), the Arbitrage Pricing Theory (APT), Options Theory and the BlackScholes (8-S) Option Pricing Model. The main conclusion of the study is that the main capital market theories and pricing models, as reviewed in the study, do provide a reasonably accurate description of reality, but a number of anomalies and controversial issues still need to be resolved. The main recommendation of the study is that research into these theories and models should continue unabated, while the specific recommendations in a South African context are the following: ( 1) the benefits of global diversification for South African investors should continue to be investigated; (2) the level and degree of efficiency of the JSE Securities Exchange SA (JSE) should continue to be monitored, and it should be established whether alternative theories to the EMH provide complementary or better descriptions of the efficiency of the South African market; (3) both the CAPM and the APT should continue to be tested, both individually and jointly, in order to better understand the pricing mechanism of, and risk/return relationship on the JSE; (4) much South African research still needs to be conducted on the efficiency of the relatively new options market and the application of the B-S Option Pricing Model under South African conditions. / Financial Accounting / M. Com. (Accounting)