It has been suggested that the Kalman filter technique may be used to improve the quality of hedge fund replication, compared to existing replication techniques. This study uses the Kalman filter technique, along with three variations of the rolling-window regression technique, to create clones which attempt to replicate the returns of various categories of hedge fund indices. These clones are created over several scenarios and are used to compare the ability of the Kalman filter and rolling-window regression techniques. The clones are constructed using South African specific asset class and investment style factors. This study finds that the Kalman filter does not provide the expected improvement in replication ability over the rolling-window regression, for the hedge fund indices analysed. The competing techniques appear to each be better suited to replicating different hedge fund index strategies and may, therefore, be used in combination. While some of the hedge fund clones offer desirable risk characteristics, they offer lower mean returns and underperform their indices in most periods. As such, the hedge fund clones constructed in this study require further refinement and are not yet equipped for use in practice.

Inflation poses a serious threat to the purchasing power of assets over time. This study examines the short and long-term inflation hedging capabilities of South African equities, bonds, listed property and cash - and compares them to foreign substitutes. The aim of this study is to investigate the inflation hedging capabilities of four primary asset classes in both domestic and foreign contexts: equities, bonds, listed real estate and cash. More specifically, this study evaluates how well each asset class performs with respect to South African inflation, and through a comparative analysis of the results, identifies which asset class may be regarded as the superior inflation hedge. Moreover, the inflation hedging capabilities of domestic assets are compared to foreign asset classes in an attempt to provide investors with valuable insights as to whether domestic and/or foreign asset classes offer better protection against the harmful effects of inflation. Finally, the study demonstrates how well these asset classes perform with respect to inflation over short and long-run horizons. The data used in this study comprises total return indices which portray a more accurate picture of an investor's return. The period 1999-2015 forms the range within which data for all domestic and foreign asset classes are available, and thus constitutes the sample period used in this study's comparative analysis. Excluding domestic bonds on the basis of data availability, the comparative analysis of domestic asset classes, dates back to 1965. This study makes use of the following tests: Pearson correlations, Augmented Dickey-Fuller, Phillips-Perron, Granger causality, OLS regression, VAR and Impulse Response Functions, and Cointegration. This study finds evidence in support of a negative contemporaneous and lagged relationship between domestic and foreign equities, and South African inflation in the short-run (also widely recognised as the "inverted Fisher effect"). Domestic bonds, property and cash were found to provide a partial inflation hedge in the short-run. Cash was found to exhibit the strongest hedging properties. On the other hand, foreign bonds, property and cash were found to be anti-inflation hedges with contemporaneous and lagged inflation. However, although foreign asset classes do not offer protection against contemporaneously or lagged inflation, they do provide a leading return prior to inflation manifesting. Consequently, if profits are taken early enough it can provide investors with an inflation hedge. This is important for local investors to be aware of when deciding to invest in foreign asset classes with the goal of hedging against inflation. Utilising the Engle- Granger Cointegration test, the findings of this study suggest that both domestic and foreign asset classes do not display a long-term relationship with inflation. This suggests that both domestic and foreign asset classes are anti-inflation hedges, since neither covary positively with inflation in the long-run. One major implication of these findings is that investment firms, whose benchmarks' contain consumer price indices (CPI), rely on the fact that the average returns of various asset classes exceed the average inflation rate in the long run, rather than being good inflation hedges (viz. co-movement with inflation).

This study investigates the effects of the 2008 financial crisis and stock market automation on the efficiency of the Botswana Stock Exchange (BSE). It makes use of the BSE All Share Index (ALSI) logged returns covering the time period 2005 – 2017. In addition, four distinct tests are employed to test for the change in market efficiency over time: runs test, unit root test, serial correlations test and variance ratio test. The study found resounding evidence to conclude that the 2008 financial crisis and stock market automation had a significant positive effect on the efficiency of the BSE. In addition, the BSE went from being inefficient to weak-form efficient due to the policies implemented by the government of Botswana and financial regulators as a direct reaction to the 2008 financial crisis, plus the continuous improvement of the Automated Trading System (ATS). To the author’s knowledge, this study is the first of its kind to test the impact of the 2008 financial crisis and automation of the trading system on the weak-form market efficiency of the BSE. As a result, this study provides an original and unique testimony on the effects of the 2008 financial crisis and the ATS on the efficiency of the Botswana Stock Exchange. Moreover, it offers an updated position of the BSE’s efficiency status following the recent developments to ensure that relevant legislation and effective and efficient trading systems are in place.

This research report documents multiple accounts of past return-based momentum strategies employed on South African-listed equities over the period 2002.02-2015.05. Two cross-sectional momentum approaches-strategies that go long (short) in assets with relative formation period out performance (underperformance) of peer stocks to make the winner (loser) portfolio-and four time-series approaches-strategies that go long (short) in assets with formation period outperformance (underperformance) of a hurdle rate to make the winner (loser) portfolio-are employed in this report. This report finds that both the top decile winner portfolio and top half winner portfolio long-only cross-sectional momentum strategies outperform the benchmark. The 12-month formation period top decile winner achieves the highest long-only excess return of 30.21% per annum, whilst all the loser cross-sectional portfolios constitute a return-reducing funding portfolio when conducting a n investment-neutral winner minus loser approach. Short-term zero investment exposure cross-sectional momentum strategies earn strong negative returns, thus presenting contrarian investment opportunities The two exposure-neutral winner minus loser time-series strategies exhibit similar results to the corresponding cross-sectional strategies, however the variable exposure strategies earn positive returns for every formation period-the 12-month formation period strategy being the best earner (25.92% p.a.). These variable exposure strategies earn time-varying returns from the market due to their non-zero net long market exposure as well as some residual return. This premium is left uncaptured by all investment-neutral app roaches and is a strong cause of the lack of skewness of the variable exposure strategies' returns. All of the examined exposure-neutral strategies exhibit significant leftward skewness due to two incidences of extreme and sustained drawdowns. Both incidences occur as a result of the momentum strategy holding market beta exposure of the opposite sign to the market's drastic turn ; the first: positive exposure and market downturn, the second : negative exposure and positive upturn. These drawdowns are reduced when employing strategies of a more intermediate-term formation period such as the 12-month formation strategy. This report's findings confirm the existence of cross-sectional and time-series momentum in South African-listed equities, as well as the case of equity momentum crashing. Further, it provides evidence for both explained and unexplained variations between the two types of momentum trading, with possibilities for further profitability when combining the two.

This study investigates empirical properties of South African bonds over the period 2000 to 2016. In particular, it investigates i) mean reversion in bond returns; ii) the correlation between bond returns and the inflation rate; and, iii) the correlation between bond returns and equity returns. An understanding of bond return dynamics would allow bond investors to assess which bond properties work in their favour. Thus this study seeks to guide bond investors, and to add to the knowledge of the bond market concerning bond return dynamics in an emerging market economy. The study employs a quantitative research methodology, using a nonexperimental research design. The investigation is carried out at the macroeconomic level using the JSE All Bond Indices as the bond investment proxy, the FTSE/JSE All Share Total Return Index as the equity investment proxy, and the Consumer Price Index as the proxy used to measure the inflation rate. The sample autocorrelation function is used to test for mean reversion and the Kendall Tau-b correlation test is used for the correlation investigations. This study does not find statistically significant evidence of long term mean reversion but finds statistically significant evidence of short-term mean reverting behaviour in the period 2013-2016. Furthermore, this study reveals that short-term serial correlations vary and are sensitive to political developments in the economy. The correlation analysis between bond returns and the inflation rate and bond returns and stock returns did not return statistically significant correlation values. However, further analysis provided evidence against the use of bonds as an inflation hedge and of diversification benefits to be reaped from combining bonds and stocks together in a portfolio.

Traditionally, investment practitioners and academics alike have used stock fundamentals and a linear framework in order to predict future stock performance. This approach has been shown to have flaws as literature has shown that stock returns can exhibit non-linearity and involve complex relations beyond that of a linear nature (Hsieh, 1991; Sarantis, 2001; Shively, 2003). These findings present an opportunity to investment practitioners who are better able to model these returns. This dissertation attempts to classify stocks on the S&P 700 index using a Classification and Regression Tree (CART) built during an in-sample period and then used for predicative purposes during an out-of-sample period deliberately comprising both a period of financial crisis and recovery. For these periods, various portfolios and performance measures are calculated in order to assess the models performance relative to the benchmark, the Standard and Poor (S&P) 700 index.

Zugl.: Oestrich-Winkel, Europ. Business School, Diss., 2006

Thesis (doctoral)--Europ. Business School, Oestrich-Winkel, 2006.

The value-growth investment style is a popular strategy for obtaining abnormal returns. However, limited research has been done on how value and growth stocks perform during periods of economic downturn, particularly in emerging economies. The 2008 financial crisis has been named one of the worst recessions. By the end of February 2009, it accounted for a destruction of equity worth $29 trillion worldwide. This study focused on the performance of value versus growth stocks on the Johannesburg Stock Exchange (JSE), during and post the financial crisis period. This was done by evaluating the general performance of value versus growth stocks and the performance of these stocks based on market size. Value stocks were defined as those constituting the lowest 30% Price to Book ratios on the JSE All Shares Index (ALSI). On the other hand, growth stocks comprised of shares with the highest 30% Price to Book ratios. The stocks were further divided by market capitalisation (cap) using the ALSI Top 40 (Large cap), Medium cap and Small cap indices. A one year holding period was used such that portfolios were reconstructed annually using the relevant ALSI constituents. Total Returns were used in the analysis in order to capture the contribution of both capital gains and dividend income. The results from Student’s t-test and the Mann-Whitney U test showed that there were no statistical significant differences between value and growth stocks returns on the JSE during the financial crisis period. Despite this, the trend implied that value stocks outperform growth stocks, but investing in the JSE ALSI produces relatively higher returns than value and growth stocks during crisis periods. This is useful to investors since small percentage differences may amount to significant monetary values. On the other hand, post the financial crisis period, overall return differences showed that growth stocks performed better than value stocks and the market. However, the results were statistically significant in only one of the three years. The study also found that the analysis of value versus growth stocks by size provides further explanations on their annual performance.

The main objectives of the study are to empirically explore the determinants of capital structure for commercial banks in Botswana and to determine the internal factors that influence the performance of the banks. A study on what determines capital structure for banks and the factors that influence performance has never been done for Botswana, thus the study aims to add on to the existing literature. Quantitative approach, mainly multiple regression models and descriptive statistics, are used to find the relationship among the independent and dependent variables based on the five years data for the period 2012 to 2016. The dependent variables are the total leverage, short-term, and long-term leverage and the performance measure is the Return on Assets. The empirical results conclude that in accordance with the pecking order theory and the finance literature, debt has an overall negative relationship with banks performance, and the bigger the bank the less debt is employed. Further, this study proves efficiency theory for Botswana banks. That is the relationship between capital adequacy and liquidity with return on assets did not provide statistically-significant results. It is hoped that the results of the study will assist managers on employing the right balance of debt and equity to achieve desired performance.