published_or_final_version / Business Administration / Master / Master of Business Administration

published_or_final_version / Business Administration / Master / Master of Business Administration

published_or_final_version / Management Studies / Master / Master of Business Administration

published_or_final_version / Business Administration / Master / Master of Business Administration

published_or_final_version / abstract / Economics and Finance / Doctoral / Doctor of Philosophy

published_or_final_version / abstract / Economics and Finance / Doctoral / Doctor of Philosophy

This thesis presents three essays on the Chinese equity market. Specifically I focus on the long run common trends and microstructure of the market after a set of regulatory events that surrounded a trading reform in 2001. The major goal of the thesis is to establish the interaction between the composition and medium of the transaction environment and the overall observed trends within the market at the aggregate level. In Chapter 2, I present a model of common trends amongst the Chinese equity market segments and implement a robust test for cointegrating relations.  In Chapter 3, I derive a multivariate linear rational expectations model in the presence of heteroscedasticity and information asymmetry.  In Chapter 4, I implement this theoretical model for A and B share cross listed stocks on the Shanghai stock exchange and impute the model parameters.  Whilst these chapters concentrate on China, the methodology and economic rationale are of practical relevance to all countries and most types of traded securities.

LL.M. (Commercial Law) / Please refer to full text to view abstract

M.Comm. / Stock Exchange as an instrument for the financing of South African industry. The Johannesburg Stock Exchange, like all stock exchanges in the world, has as main functions, firstly, the raising of capital for industry and secondly, the provision of a market for the trading of financial paper. As such, the Johannesburg Stock Exchange is of vital relevance for the national economy. It has implications for the formation and flow of capital and therefore the functioning of savings and investment industry of the country. The channelling of savings into industry, green field projects, the provision of housing, education and health care, as well as the development of the infrastructure, are all affected by the workings of the Johannesburg Stock Exchange. The Johannesburg Stock Exchange is the largest stock exchange on the African continent, having a market capitalisation of R919 803 million in 1994. This, however, does not mean that the Stock Exchange performs its function as an instrument for the financing of South African industry effectively. The Stock Exchange is known for its high level of illiquidity with only six percent of the shares listed on it being traded on an annual basis. The shares that are traded regularly are restricted to the 30 - 50 prime shares which are held mainly by the large institutional investors and the mining houses. A study of the owners of shares listed on the Stock Exchange shows a large concentration of control and ownership in the hands of only three institutions, namely, the Anglo-American group of companies and the two large insurance companies Old Mutual and Sanlam. Research has shown that as many as 65 percent of the shares on the Johannesburg Stock Exchange are owned by only 1 200 shareholders and that there are not more than 750 000 South Africans who are shareholders, representing less than four percent of the South African population. Participation in the activities of the Johannesburg Stock Exchange by the small investor has declined continuously over the last two to three decades. The decline in small investor presence in the market deprives the Development Capital Market and the Venture Capital Market of financing. New capital raised on the Stock Exchange amounts to an average of around R12 billion per year. The funds raised are mainly attributed to the selling of the paper of gilt-edged companies. The so-called second rated companies, which comprise 80 percent of the market, do not enjoy the share turnover rates that the gilt-edged companies do. The shares of the second raters comprise less than 10 percent of the turnover on the market. The shares of the second raters are not only traded in relatively small volumes but they are also traded rather sporadically. This poor performance of the Stock Exchange as a primary capital market compel the smaller companies to seek financing elsewhere. Such financing is almost always more expensive than equity financing. The high costs involved in obtaining a listing on the Stock Exchange is another factor that may encourage smaller businesses to obtain their financing from financial institutions rather then from the Stock Exchange. South Africa has now entered a new phase of socio-economic development on account of the revised political dispensation and becoming a full member of the international community once again. These changes have once again placed South Africa on the world map as a venue for investment. The Johannesburg Stock Exchange could play a very important role in this respect. It will, however, have to become a more active market. The financing of South Africa's industry cannot rely mainly on foreign investment, it must generate more domestic financial support. The Johannesburg Stock Exchange is an ideal institution to perform such a function. The Stock Exchange will, however, have to create a more liquid market by increasing turnover to a level more in line with those of stock exchanges elsewhere in the world. Such an achievement will add significantly to the pool of funds available for the financing of the South African industry.

Ph.D. / This thesis investigates the impact of domestic and foreign financial crises on volatility dynamics in South Africa. In a sample ranging from January 1994 to March 2009, Chapter 2 provides empirical support for the theory that domestic currency crises are associated with significant structural changes in daily exchange rate volatility. Speciacally, crisis periods coincide with large positive shifts in unconditional variance. Using this fact, we propose a new method - the structural change generalised conditional heteroskedasticity, or SC-GARCH, model - for identifying precise start- and end-dates for crises. Chapter 3 studies volatility transmission within SA from October 1996 to June 2010. Using a generalised version of the vector autoregressive (VAR) approach, time-varying and bidirectional volatility spillover indices are esti- mated for domestic currency, bond and equity markets. The results identify equities as the primary source of volatility transfer to other asset classes. At di erent points in time, spillovers are responsible for anywhere between 7.5 and 65 percent of system-wide volatility. Local maxima in spillover magni- tudes are estimated during domestic, as well as foreign crisis periods. Chapter 4 estimates time-varying comovement between SA and world volatilities during the period from 1994 to 2008. A dynamic factor model (FM) is used to extract three latent global volatility factors from a data panel which is representative of the world equity market portfolio. Relative to most other emerging markets, the global factors are poor predictors of volatility in SA. However, SA's comovement with global volatility increases sharply in response to emerging market crises in Asia (1997-8) and Russia (1998). The global factors are also important determinants of domestic volatility during the latter stages of the US subprime crisis (2007-8). Chapter 5 proposes the factor-augmented VAR as a parsimonious model for the transmission of foreign volatility shocks to SA equities. We compare international volatility transmission resulting from crises in Asia (1997-8) and the US (2007-8). Although the US crisis has a larger impact on the world equity market, the Asian shock leads to more dramatic increases in volatility in emerging economies, including SA.