published_or_final_version / Economics and Finance / Master / Master of Economics

A research report submitted to the School of Economic and Business Sciences, Faculty of Commerce, Law and Management, University of the Witwatersrand, in partial fulfilment (50%) of the requirements for degree of Master of Commerce in Finance. Date of submission: April 2016 / International studies have widely documented the long-run underperformance of firms conducting secondary equity offerings (SEOs), a phenomenon commonly referred to as the ‘new issues puzzle’. Understanding the market’s reaction to SEOs is vital for managers who are commonly tasked with deciding on how to finance their firm’s operations. This study investigates the short-run and long-run performance of firms conducting SEOs on the Johannesburg Stock Exchange (JSE) over the period of 1998 to 2015, by exploring both rational and behavioural models in predicting SEO behaviour. Event-study analysis reveals that the market generally reacts negatively to the announcement of SEOs with a statistically significant average two-day cumulative abnormal return of -2.6%. Using a buy-and-hold abnormal return approach, as well as factor regression analysis to study the long-run share performance of issuing firms, there is no evidence that issuing firms significantly underperform relative to non-issuing firms over a five-year period when testing for abnormal share return performance with the Capital Asset Pricing Model. Furthermore, issuing firms exhibit no consistent signs of operating underperformance in comparison to non-issuing firms over a fiveyear period. Finally, in evidence contradicting the market timing theory, investor sentiment appears to bear no consistently significant influence on either a firm’s decision to issue equity, or on the short-run and long-run performance of SEOs. Overall, the results imply that the longrun performance of SEOs conducted in South Africa is best described by rational explanations centred on the risk-return framework. There is no consistent evidence of any ‘new issues puzzle’ on the JSE. / MT2017

A research report submitted to the Faculty of Commerce, Law and Management, University of the Witwatersrand, Johannesburg, in partial fulfillment of the requirements for the degree of Master of Management in Finance and Investment. Johannesburg, 2016 / The prediction of stock price and index level in a financial market is an interesting but highly complex and intricate topic. Advancements in prediction models leading to even a slight increase in performance can be very profitable. The number of studies investigating models in predicting actual levels of stocks and indices however, far exceed those predicting the direction of stocks and indices. This study evaluates the performance of ensemble prediction models in predicting the daily direction of the JSE All-Share index. The ensemble prediction models are benchmarked against three common prediction models in the domain of financial data prediction namely, support vector machines, logistic regression and k-nearest neighbour. The results indicate that the Boosted algorithm of the ensemble prediction model is able to predict the index direction the best, followed by k-nearest neighbour, logistic regression and support vector machines respectively. The study suggests that ensemble models be considered in all stock price and index prediction applications. / MT2017

By doing so, we contribute to the existing literature in at least the following aspects: / First, contrasted with Chakravarty (2001) which finds that cumulative price change is mainly caused by institutional investors, we document that, at least in the Chinese IPO market, it is the individual investors, rather than the institutions, that have the most dominant impact on the cumulative price change. This is consistent with the prediction of De Long et al. (1990a) and the fact that noise trader risks play an important role in Chinese stock market, which leaves the prices deviated from fundamental values and not arbitraged out. / Initial Public Offering (IPO) refers to the first sale of stocks by a company (called an issuer) to the public. Since the late 1960s high initial return, which is measured from the offer price to the first-day closing price, has become a hot topic. This phenomenon has been found in a range of countries, and in China the ratio is even much higher. / On top of that, we further investigate different types of individual investors by categorizing them according to their trading experiences. We find that those less experienced individuals tend to buy an IPO stock in a more impatient way, while investors who buy on the first non-hit day are more experienced. And waiting averagely 1.4 days can raise the return by more than 1.5% in 30 days. / Our research attempts to tackle the high initial return in China from the aspect of investor structure. First, we find empirical evidence that there are more sells than buys on the IPO day, and this demonstrates that flippers are responsible for the huge trading volume. Combining the identities of investors with the trading data, we also find that individual investors dominate the first day trading, in the sense that individuals, rather than institutions, contribute a larger part of the cumulative price change on the IPO day. / Our studies have many practical implications from several perspectives. First, analyzing the investor structure and their behavior during the IPO day can help us understand the characteristics of those investors who move the stock price. Second, our research can also help to know the different trading style of different kinds of investors. According to our research, investors maybe can design more favorable investment strategies. And for the regulators, our research can help them formulate more reasonable trading rules and regulations. / Second, existing literature show that more experienced investors tend to end up with better investment results, while our study builds a bridge between investor experiences and their decision making procedure. Our finding also contributes to the technical analysis literature, such as Lo, Mamaysky and Wang (2000), among others, in that we find experienced investors indeed tend to do more technical analysis and obtain better investment results. / Zhai, Weili. / Advisers: Jia He; Ying Foon Chow. / Source: Dissertation Abstracts International, Volume: 73-08(E), Section: A. / Thesis (Ph.D.)--Chinese University of Hong Kong, 2011. / Includes bibliographical references (leaves 113-122). / Electronic reproduction. Hong Kong : Chinese University of Hong Kong, [2012] System requirements: Adobe Acrobat Reader. Available via World Wide Web. / Electronic reproduction. Ann Arbor, MI : ProQuest dissertations and theses, [200-] System requirements: Adobe Acrobat Reader. Available via World Wide Web. / Abstract also in Chinese.

by Lo Wai-chu, Lo Yiu-hee. / Abstract also in Chinese / Bibliography: leaves 138-139 / Thesis (M.B.A.)--Chinese University of Hong Kong, 1983

by Mui Yim-ming. / Text in Chinese and English / With an abstract in Chinese / Bibliography: leaves 42-43 / Thesis (M.B.A.)--Chinese University of Hong Kong, 1982

by Wai Chi-kin. / Abstract also in Chinese / Bibliography: leaves 174-175 / Thesis (M.B.A.)--Chinese University of Hong Kong, 1982

by Chan Ping Kei Patrick & Sun Fuk Cheung, Admiral. / Thesis (M.B.A.)--Chinese University of Hong Kong, 1994. / Includes bibliographical references (leave 40). / ABSTRACT --- p.ii / TABLE OF CONTENTS --- p.iii / Chapter / Chapter I. --- INTRODUCTION & BACKGROUND --- p.1 / Chapter 1.1 --- Objectives of our study --- p.2 / Chapter 1.2 --- Category of Red Chips --- p.3 / Chapter 1.3 --- "A, B and H shares compared" --- p.4 / Chapter II. --- METHODOLOGY --- p.8 / Chapter 2.1 --- Period of study --- p.10 / Chapter 2.2 --- Redchip Index (RCI) --- p.11 / Chapter 2.3 --- Share price return --- p.12 / Chapter 2.4 --- Initial Public Offering (IPO) --- p.13 / Chapter 2.5 --- Estimating Betas --- p.14 / Chapter 2.6 --- P/E comparison --- p.15 / Chapter III. --- RESULTS --- p.16 / Chapter 3.1 --- Background information --- p.16 / Chapter 3.2 --- Empirical analysis --- p.18 / Chapter 3.3 --- Share price return --- p.20 / Chapter 3.4 --- Performance of new issues in 1993 --- p.21 / Chapter 3.4.1 --- General trends --- p.21 / Chapter 3.4.2 --- Seasoning effect --- p.24 / Chapter 3.5 --- Beta estimation --- p.27 / Chapter 3.6 --- P/E comparison --- p.28 / Chapter 3.7 --- China factors --- p.28 / Chapter IV. --- THE VIEW OF PRACTITIONERS --- p.30 / Chapter V. --- CONCLUSION --- p.31 / APPENDIX --- p.32 / BIBLIOGRAPHY --- p.40

by Hui Sheung Yin, Yim Kam Kin. / Thesis (M.B.A.)--Chinese University of Hong Kong, 1994. / Includes bibliographical references (leaves 69-70). / abstract --- p.ii / table of contents --- p.iii / list of tables --- p.v / acknowledgments --- p.vi / Chapter Chapter I. --- INTRODUCTION --- p.1 / Chapter Chapter II. --- literature review --- p.4 / Ivo Welch (1989) --- p.4 / Rock (1986) --- p.5 / Beatty and Ritter (1984) --- p.6 / "Kim, Krinsky and Lee (1993)" --- p.7 / McGuiness (1990) --- p.8 / Grinblatt and Hwang (1989) --- p.9 / Thomas J. Chemmanur (1993) --- p.10 / Chapter Chapter III. --- RESEARCH METHODOLOGY --- p.11 / Data Description --- p.11 / The Measurement of Underpricing Levels - --- p.14 / The Determination of IPO Underpricing --- p.17 / Explanation 1 for IPO: Uncertainty --- p.19 / Explanation 2 for IPO： Underwriter's Quality --- p.20 / Explanation 3 for IPO： Signaling Effect --- p.22 / Chapter Chapter IV. --- RESULTS AND DISCUSSION --- p.24 / First Day Initial Excess Return --- p.24 / Correlation between Initial Excess Return and determinations --- p.27 / Multivariate Regression Analysis --- p.29 / Chapter Chapter V. --- CONCLUSION --- p.36 / APPENDIXES / Chapter 1. --- Listing Requirements and Methods of Listing (For Equity Securities) --- p.38 / Chapter 2. --- Ranking of Underwriters --- p.41 / Chapter 3 . --- Correlation Matrix for Initial Excess Return and Explanatory Variables --- p.43 / Chapter 4. --- Selected Hong Kong Initial Public Offerings April 86 - December 92 --- p.44 / Chapter 5. --- Percentage Price Change From Offer Price of the end of the First Trading Day --- p.51 / Chapter 6. --- "Daily Excess Return, Periods: First Day to Seventh Day after listing" --- p.55 / Chapter 7. --- "Daily Excess Return, Periods: 8th to 10th, 15th, 20th, 25th and 30th day after listing" --- p.62 / BIBLIOGRAPHY --- p.69

Chiu Wai Shing, Lam Ming Kei. / Thesis (M.B.A.)--Chinese University of Hong Kong, 1994. / Includes bibliographical references (leaves 35-37). / ABSTRACT --- p.ii / TABLE OF CONTENTS --- p.iii / LIST OF TABLES --- p.iv / ACKNOWLEDGEMENT --- p.v / CHAPTER / Chapter I. --- INTRODUCTION --- p.1 / Chapter II. --- PREVIOUS RESEARCH --- p.5 / Chapter III. --- DATA AND METHODOLOGY --- p.11 / Chapter IV. --- COMPARISON OF BANK STOCK RETURNS WITH MARKET RETURNS --- p.19 / Chapter V. --- FACTORS INFLUENCING BANK STOCK PRICE --- p.21 / Chapter VI. --- INTEREST RATE SPREAD SENSITIVITIES AND ELASTICITIES OF BANK STOCK RETURNS --- p.26 / Chapter VII. --- CONCLUSIONS AND IMPLICATIONS --- p.33 / REFERENCES --- p.35