Using a large panel of Treasury futures and options, I construct model-free measures of bond uncertainty and tail risks. In my first paper, I mainly study the behavior of bond risk measures around FOMC announcements and document three novel findings: First, bond uncertainty risk displays a rise and resolution similar to the stock VIX index, while tail risks don't respond to announcements. Second, pre-FOMC announcement drift exists in terms of Treasury yields declining by 1 bps on the day before the announcement. Third, option-implied uncertainty cannot help explain the pre-FOMC announcement drift. In my second paper, I propose a new Flight-to-Safety (FTS) regime-switching model with time-varying stock-bond correlation and regime-switching probabilities. I document that the inclusion of higher-order moments such as tail risks is crucial to capturing Flight-to-Safety. In particular, higher bond tail risk lowers investors' intention to Flight-to-Safety. Time-varying tail risk correlation between stocks and bonds helps explain return correlation. Also, model estimates imply that FTS comprises 30% of the sample, which is significantly higher than the earlier work. I then apply my model with FTS probability-based asset allocation to prove that it significantly outperforms other models. / 2024-05-10T00:00:00Z

Includes bibliographical references (leaves 71-74). / Developments in South Africa over the past few years clearly testify to the strong relationships between economic growth and credit expansion. The paper analyses the factors driving credit growth in South Africa. It shows the strong income effect on the credit level in South Africa while the changes in interest rates do negatively affect home loans but have less effect on other components of bank credit to the private sector. This paper concludes that the interest rates policy must be combined with other tools of monetary and financial policy to guarantee a structurally lower level of credit to the private sector.

The South African Labour Market has experienced labour disputes from as early as 1913 (Davenpot, 2013). These labour disputes serve as a visual illustration of the inefficiencies that reside in the collective bargaining process between the working class and the top management of a company (Becker and Olson, 1986). This study aims to investigate these inefficiencies and determine the impact that they may have on the shareholder value of a company. By doing this, an improved understanding of the South African Financial Markets can be developed. This study consists of a sample set of 46 strikes between 2003 to 2017. This represents only a fraction of the total amount of strikes that South Africa has experienced in recent years as the majority of strikes revolve around community disputes (Department of Labour, 2018). The study concluded that investors react negatively when a strike is longer than 10-days – leading to a sell-off of the company’s share. This led the study to further investigate whether duration plays a key part in the negative abnormal returns generated by a strike. It was then determined that strikes that were longer than 20-days resulted in far greater negative returns, whilst strikes that were shorter seemed to be overlooked by investors. The paper also found that the market is unable to predict an incoming strike that may possibly damage the financial integrity of a firm. Lastly, the study concluded that the amount of Net Income, Dividends Paid, Free Cash Flow, Cash and Debt listed in the financial statements did not significantly influence the abnormal returns induced by strikes.

Includes bibliographical references. / A growing body of empirical evidence has found inconsistencies in the Capital Asset-pricing Model (CAPM) of Sharpe (1964), Lintner (1965), and Black (1972) and Ross's (1976) Arbitrage Pricing Theory (APT). Numerous attempts to explore the validity of these theories of modern finance have led to the identification of various firm specific attributes that explain the cross-sectional variation of returns. These attributes have appropriately been termed 'style anomalies '.This thesis investigates the existence and exploitability of style anomalies for the shares comprising the Toronto Stock Exchange (TSX) for the period 31 January 1989 to 31 July 2005. The investigation is divided into four areas of research. First, a methodology similar to Fama and Macbeth (1973) is used to explore the cross-sectional relationships between some 904 firm-specific attributes and the unadjusted and risk adjusted monthly returns of equities constituting the S&P TSX Composite Index. A myriad of uncorrelated style anomalies are found to persist before and after controlling for systematic risk, and are categorized as either size, growth, momentum, value, liquidity and bankruptcy (risk) effects. The most significant attributes from each respective style group include: Price, eighteen month change in net tangible asset value, price change over twelve months, twelve month change in price to net tangible asset value, three month change in the absolute volume ratio and interest cover before tax. Multivariate testing confirms the ability of anomalies to explain excess returns. In and out sample cross sectional tests show inconsistent anomaly persistence, raising the question of whether they are perhaps perennial in nature. Second, the predictability of style payoffs is examined through the analysis of autocorrelation and six style timing models. Strong positive autocorrelation at lower orders for the majority of style payoffs suggests that the ability to time payoffs is possible. The six month moving average timing model shows the best forecasting skill, followed by twelve month and eighteen month moving average models. Third, the presence of firm specific attributes among three classified sectors namely: Basic materials, Cyclicals and Non-Cyclicals are compared. Risk, value and liquidity based anomalies dominate the Basic Materials shares. Liquidity effects stand out within the Cyclicals group, and the Non-Cyclicals sectors exhibit value and size effects. The ability to exploit all style-based anomalies after accounting for transaction costs is evaluated using a portfolio sorting methodology. The tests illustrate that increased exposure to the anomalies has delivered substantially higher returns with lower volatility than a buy and hold approach using an equally weighted all share benchmark. These abnormal returns are confirmed after adjusting for systematic risk. Further testing shows that the attributes, rather than loading on those attributes, are better at explaining share returns. Finally, the seasonal nature of Canadian equity returns is investigated. A six month strategy of "Selling in June and going away till December" provides the most optimal returns. The calendar month tests find January, February and December to be the strongest months of the year. Attribute payoffs seem to show vague seasonal tendencies.

Includes bibliographical references. / The aim of this thesis is to provide the reader with some practical applications of quantitative techniques in the area of portfolio management. The theme of the thesis is on the use of basic quantitative applications, with an emphasis on issues pertaining to optimisation, benchmarking and risk management. Most of the contributions and analysis performed in this thesis has been borne out of actual applications in the financial market industry - thus the style of the thesis reflects an application level relevant to practitioners, and is not esoteric.

Includes abstract. / Includes bibliographical references (leaves 95-96). / This study endeavors to shed more light on venture capital investment decision making process and the criteria and factors that are used to evaluate new ventures. The study will look at the investment process carried out by a typical venture capital firm, and the primary focus will be on the initial deal screening and the due diligence processes and the factors and criteria the venture capital and private equity practitioners employ in an effort to evaluate new ventures, such that potentially successful ventures are selected and are ultimately funded.

Includes bibliographical references. / This thesis investigates the construction and performance of style indices on the JSE. It then demonstrates how a 'toolkit' of style indices can be used, together with conventional passive indices, as a set of building blocks for efficient portfolio construction. This study tests the performance of a variety of potential style indices representing 'size', 'value' and 'momentum' effects. Selected indices for each style together with JSE sector indices are subsequently utilised to replicate the returns obtained on actively managed domestic equity funds using Sharpe's (1988, 1992) style decomposition method. Finally, a 'toolkit' of selected style indices are employed as building blocks to construct mean-variance and mean-tracking error optimal portfolios at low cost.

The research done on style 'anomalies' such as the book-to-market and the size effect have found that these idiosyncratic factor s explain returns better than Beta. These findings have led has to an increased importance of idiosyncratic factors in explaining returns, which is contrary to the popular Capital Asset Pricing Model (CAPM). CAPM only considers Beta or systematic risk in explaining returns and disregards idiosyncratic risk. This paper has an even greater focus on idiosyncratic factors, by testing company specific factors with no reference to market valuation. These are defined as 'quality' factors for the purposes of this paper. The paper done by Asness, Frazzini, and Pedersen (2013), found that quality stock s earned excess returns in 23 of the 24 countries that they tested. This paper followed a similar approach with respect to the definition of quality and tested whether these 'quality' factors have explanatory power on the FTSE/JSE All-Share. The explanatory power of the 'quality' factors are then combined and compared with some of the style 'anomalies'. The results found that nine of the quality factors from the single regression analysis, over the entire period from the 1st of January 1994 until the 1st of November 2014 were significant at a 95% level of confidence. The following 'quality' factors were found significant and are ranked according to the absolute t-statistics:: Accruals ratio (ACCRUALS), cash flow return on equity (CFROE), 12-month growth in earnings per share (EPS12M), 12-month growth in cash flow return on equity (CFROE12M), 24-month growth in cash flow return on equity (CFROE24M), 12-month growth in EBITDA margin (EBITDAMARG12M), 36-month growth in cash flow return on equity (CFROE36M), interest coverage before tax (ICBT), return on total capital (ROC). In the single regression results the ACCRUALS ratio ranked higher than the book-value-to-market and the earnings yield. The CFROE also exhibited a higher level of significance than the earnings yield. In the multiple regression analysis for all factors, the following factors which are ranked according to absolute t-statistics were found to be significant : book-value-to-market, cash flow return on equity (CFROE), 12-month growth in earnings per share (EPS12M), 18-month volatility in return on equity (ROEVOL18M) and the accruals ratio (ACCRUALS). Finally the cumulative payoff results are consistent with the results found in the regression analysis. In terms of cumulative payoff the ACCRUALS factor ranked first and the CFROE factor ranked fifth. The ACCRUALS and CFROE factors also had the highest and fifth highest Sharpe ratio respectively. A single 'quality' factor composite of the significant factors found may have an important role to play in asset pricing, due to the high explanatory power and stable positive relationship with returns on the FTSE/JSE All-Share.

Bibliography: leaves 123-128. / Traditional financial theory which is based on the Modigliani-Miller indifference paradigm, suggests that a firm's financial policies, of which risk management is one component, are irrelevant. However, this conclusion is seemingly contradicted by the observation of widespread use of derivatives by companies, particularly for hedging purposes. This apparent conflict is receiving attention from international financial researchers. A number of hypothesis have been proposed to explain corporate risk management. To evaluate the strength of these theories, this paper begins with a formalised process of identifying the assumptions underlying the hypotheses. The theories are classified according to which assumptions are relaxed. A limited number of international empirical studies have been performed to date. The results have been varied; four of the important studies are discussed. For the first time, an empirical investigation into the determinants of corporate risk management in South Africa is conducted. The most significant findings are that larger firms are more inclined to undertake risk management, and the likelihood of a firm hedging increases with the size of the director's ownership in the company.

Includes bibliographical references. / The Kyoto Protocol was signed into existence in 1999 in an effort to lower carbon emissions emitted around the globe. Under the protocol, a mechanism called the CDM was created in order to help developing nations, such as South Africa, lower their carbon emissions. This paper looks at the development of the carbon credits market in South Africa which was created by CDM. Since the ratification of the agreement thousands of projects have been registered by emerging countries such as India, China and Brazil, yet South Africa has only seventeen registered projects. As the largest economy in Africa, which accounts for the majority of the continent's emissions, the slow uptake of CDM projects is glaring. This research paper examines the strategic issues facing CDM projects in South Africa. The lack of skills in SA; the effect of Eskom's monopoly; the financing of the projects and the effect of government policies were posed in detail interview questions to key participants in the CDM market.