Study project (MBA)--University of Stellenbosch, 2003. / ENGLISH ABSTRACT: In a rational efficiently functioning market, the price of the share index and share index futures contracts should be perfectly contemporaneously correlated. According to the cost of carry model, the futures price should equal its fair value at maturity. The basis should be equal to the cost of carry throughout the duration of the futures contract. However, in practice the cost of carry model is obscured and the basis varies and is normally not equal to the cost of carry. Reasons for this variability in basis include the mark-to-market requirement of the futures contract, the differential tax treatment of spot and futures contracts, as well as the transaction cost of entering into a contract. Transaction costs are lower for futures contracts than for spot contracts. This study uses the Chen, Cuny and Haugen (1995) model to examine the relationship between the basis and volatility of the underlying index and between the open interest of the futures contract and the volatility of the underlying index. Chen et al. (1995) predicted that the basis is negatively related to the volatility of the underlying index and that the open interest is positively related to the volatility of the underlying index. The study will also test the statement by Helmer and Longstaff (1991) that the basis has a negative concave relationship with the level of interest rate. The tests were performed on data from ALSI, FINI and INDI futures contracts. The sample period was from January 1998 to December 2001. The results correspond to those obtained by Chen et al. (1995) in that the basis is negatively related to the volatility of the underlying index. This is true for all the three indices. The other main prediction of the Chen, Cuny and Haugen (CCH) model (1995), which is also supported by the study, is that open interest is significantly related to the volatility of the underlying index. The study also supports the statement by Helmer and Longstaff (1991) that the there is a highly significant negative concave relationship between the basis and interest rate. / AFRIKAANSE OPSOMMING: In "n mark wat rasioneel funksioneer, behoort die prys van die aandele-indeks en aandele-indekstermynkontrakte perfek gekorreleer te wees in tyd. Volgens die drakostemodel behoort die termynkontrakprys op die vervaldatum gelyk te wees aan die billike waarde daarvan. Die basis behoort vir die looptyd van die termynkontrak gelyk te wees aan die drakoste. In die praktyk word die drakostemodel egter vertroebel en wissel die basis en is dit gewoonlik nie gelyk aan die drakoste nie. Redes vir hierdie veranderlikheid van die basis sluit in die waardasie teenoor markprys van die termynkontrak, die belasting van toepassing op loko- en termynkontrakte, asook die transaksiekoste by die aangaan van "n kontrak. transaksiekoste vir termynkontrakte is laer as vir lokokontrakte. Hierdie studie gebruik die model van Chen, Cuny en Haugen (1995) om die verwantskap tussen die basis en die volatiliteit van die onderliggende indeks en tussen die oop kontrakte van die termynkontrak en die volatiliteit van die onderliggende indeks te ondersoek. Chen et al. (1995) voer aan dat daar 'n negatiewe verwantskap is tussen die basis en die volatiliteit van die onderliggende indeks en dat daar "n positiewe verwantskap is tussen die oop rente en die volatiliteit van die onderliggende indeks. Die studie toets ook Helmer en Longstaff (1991) se hipotese dat daar 'n negatiewe, konkawe verhouding tussen die basis en die rentekoersvlak bestaan. Die toetse is uitgevoer op data van ALSI-, FINI- EN INDItermynkontrakte. Die steekproef was van Januarie 1998 tot Desember 2001. Die resultate stem ooreen met dié van Chen, Cuny en Haugen (1995) se model (CCH-model) in dié opsig dat daar "n negatiewe verband is tussen die basis en die volatiliteit van die onderliggende indeks. Dit geld vir al drie die indekse. Die ander hoofresultate van Chen et al. (1995), wat ook deur die studie ondersteun word, is dat daar "n beduidende verband tussen die oop kontrakte en die volatiliteit van die onderliggende indeks bestaan. Die studie ondersteun ook Helmer en Longstaff(1991) se siening dat daar 'n beduidende, negatiewe, konkawe verhouding tussen die basis en die rentekoers bestaan.

Thesis (MBA)--Stellenbosch University, 2002. / ENGLISH ABSTRACT: A unique data set consisting of economists' expectations on key economic indicators was examined within the context of the controversial normal backwardation theory of Keynes. The economists' expectations were regarded as the expected future spot price and the relationship between them and the corresponding futures contracts was analysed. The respective economic indicators were: i) the yield from aparastatal Bond, ii) the yield from Government Bonds, iii) the rate of the 90 day Banker's Acceptance (BA) Deposit Rate and iv) the Rand/Dollar (R/$) Exchange Rate for the past seven years, i.e. 1995 to 2001. The accuracy of the economists' predictions was tested both on a visual basis and the relationship between the expected values and the futures prices was plotted in a graphical format. A nonparametric statistical procedure was used to determine whether the economists' expectations were of any value. To put it differently, the question being posed is: do these economists, as a group, possess some superior forecasting skills? Two different conclusions were reached from the analysis: First conclusion: by accepting the normal backwardation theory, it implies that the contango theory also holds. Therefore, when analysing the data set visually - depending on which theory it supports - the futures price must trade consistently below or above the expected future spot price. For this particular analysis the yield of the bond, and not its price, was the important factor. In most cases the plotted relationships between the expected values and the futures prices were found to support the contango theory and, to a lesser extent, the normal backwardation theory. Hence, speculators were, in order to make profits, predominately sellers of futures contracts. Second conclusion: the strongest conclusion, however, follows from the statistical tests conducted on the expected values. It was found that economists do possess some superior forecasting skills and if they had used their predictions and had taken the corresponding market positions, they would have been consistent winners in the futures market. Their reward would be mainly for their ability to forecast eventual spot prices and, to a lesser extent, for their risk bearing. It was impossible to link the two conclusions to confirm the normal backwardation theory, for the particular South African data set. The evidence is thus consistent with the hypothesis that the futures price is an unbiased estimate of the expected future spot price. / AFRIKAANSE OPSOMMING: 'n Unieke datastel, bestaande uit ekonome se vooruitsigte van kern ekonomiese aanwysers, is ondersoek binne die konteks van die omstrede normale terugwaardasie-teorie (d.i. "normal backwardation theory") van Keynes. Die ekonome se vooruitsigte is aanvaar as die verwagte toekomstige kontantprys en die verhouding hiertussen en die ooreenstemmende termynpryse is ontleed. Die onderskeie ekonomiese aanwysers was: i) die opbrengs op 'n Semi-Staatseffek, ii) die opbrengs op Staatseffekte, iii) die koers van die negentig-dae-Bankaksepte (BA) Depositokoers en iv) die Rand/Dollar (R/$) Wisselkoers oor die afgelope sewe jaar, d.w.s. 1995 tot 2001. Die akkuraatheid van die ekonome se vooruitskattings is op 'n visuele basis vergelyk, en die verhouding tussen die verwagte prys en die termynpryse is in grafiese formaat gekarteer. 'n Nie-parametriese statistiese prosedure is gebruik om vas te stel of hierdie ekonome se vooruitsigte van enige waarde was. Anders gestel, die vraag is: beskik hierdie ekonome as 'n groep oor sekere superieure vooruitskattingsvaardighede? Die volgende twee afsonderlike gevolgtrekkings is geformuleer: Eerste gevolgtrekking: deur die normale terugwaardasie-teorie te aanvaar, impliseer dit dat die contango-teorie (d.i, "contango theory") ook geldig is. Dus, wanneer die datastel visueel getoets word - afhangende van watter teorie dit ondersteun - moet die termynprys konsekwent bo of onder die verwagte toekomstige kontantprys verhandel. Vir hierdie bepaalde analise was die opbrengs van die staatseffek die belangrike faktor en nié die prys daarvan nie. In die meeste gevalle het die gekarteerde verhouding tussen die verwagte prys en die termynprys getoon dat dit die contango-teorie ondersteun het en, in 'n mindere mate, die normale terugwaardasie-teorie. Derhalwe was spekulante, ten einde wins te maak, oorwegend die verkopers van termynkontrakte. Tweede gevolgtrekking: die belangrikste gevolgtrekking volg egter uit die statistiese toetse wat uitgevoer is op die verwagte pryse. Daar is bevind dat ekonome wel oor superieure vooruitskattingsvaardighede beskik en dat, indien hulle hul vooruitskattings gebruik en die ooreenstemmende markposisies ingeneem het, hulle konsekwent wenners in die termynmark sou gewees het. Hulle vergoedings sou hoofsaaklik gewees het vir hulle vermoë om uiteindelike kontantpryse te voorspel en, in 'n mindere mate, vir hulle risiko-blootstelling. Dit was onmoontlik om hierdie twee vergelykings met mekaar te verbind om sodoende die normale terugwaardasie-teorie te onderskryf vir die betrokke Suid-Afrikaanse datastel. Die bewyslewering is dus konsekwent met die hipotese dat die termynprys 'n onsydige skatting van die verwagte toekomstige kontantprys is.