There is a large body of research that indicates that international equity markets co-move over time. This co-movement manifests in various instruments, ranging from equities and bonds to soft commodities. However, this co-movement is more prevalent over crisis periods and can be seen in returns and volatility transmission effects. The recent financial crisis demonstrated that no local market is immune to transmission effects from international markets. South African financial market participants, such as investors and policymakers, have a vested interest in understanding how the equity market in particular and the economy in general react to international financial crises. This study aims to contribute an improved understanding of how the South African equity market interacts with international equity markets, by identifying the degree of price and volatility transmission before, during, and after an international financial crisis. This was done by investigating the possibility of changes in price and volatility transmissions from the Asian financial crisis (1997–1998), the dotcom bubble (2000–2001) and the more recent subprime financial crisis (2007–2009). An Exponential Generalized Autoregressive Conditional Heteroskedasticity (E-GARCH) model was employed within the framework of an Aggregate Shock model. The results indicate that during the international financial crises studied, the JSE All Share Index was directly affected through contagion effects inherent in the returns of the originating crisis country. Volatility transmissions during international financial crises came directly from the originating crisis country. Finally, the FTSE 100 Index was the main exporter of price and volatility transmission to the JSE All Share Index. / Thesis (M.Com. (Risk management))--North-West University, Potchefstroom Campus, 2012

There is a large body of research that indicates that international equity markets co-move over time. This co-movement manifests in various instruments, ranging from equities and bonds to soft commodities. However, this co-movement is more prevalent over crisis periods and can be seen in returns and volatility transmission effects. The recent financial crisis demonstrated that no local market is immune to transmission effects from international markets. South African financial market participants, such as investors and policymakers, have a vested interest in understanding how the equity market in particular and the economy in general react to international financial crises. This study aims to contribute an improved understanding of how the South African equity market interacts with international equity markets, by identifying the degree of price and volatility transmission before, during, and after an international financial crisis. This was done by investigating the possibility of changes in price and volatility transmissions from the Asian financial crisis (1997–1998), the dotcom bubble (2000–2001) and the more recent subprime financial crisis (2007–2009). An Exponential Generalized Autoregressive Conditional Heteroskedasticity (E-GARCH) model was employed within the framework of an Aggregate Shock model. The results indicate that during the international financial crises studied, the JSE All Share Index was directly affected through contagion effects inherent in the returns of the originating crisis country. Volatility transmissions during international financial crises came directly from the originating crisis country. Finally, the FTSE 100 Index was the main exporter of price and volatility transmission to the JSE All Share Index. / Thesis (M.Com. (Risk management))--North-West University, Potchefstroom Campus, 2012

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No. of bitstreams: 2 Dissertação - Elsie Estela Moratoya - 2014.PDF: 1759354 bytes, checksum: c262cfaeef59e283285f32b837fdee16 (MD5) license_rdf: 23148 bytes, checksum: 9da0b6dfac957114c6a7714714b86306 (MD5) Previous issue date: 2014-02-28 / This study presents an empirical analysis of price and volatility transmission for soybean and corn prices, between an international market, represented by the Chicago Board of Trade, and four domestic markets in Brazil: State of Goiás, Mato Grosso, Paraná and Rio Grande do Sul. Daily soybean and corn prices were collected for the period January, 2008 to June 2013 from the Centre for Advanced Studies in Applied Economics and the Institute of Agricultural Economics in Brazil. Henceforth, returns for the nominal price series were calculated and logaritmized for a preliminary to assess the behavior of the series, in which all were found to be integrated of order (1). Furthermore, the international market and domestic markets were found to be highly correlated. Co-movement and price transmission speed for both crops in all domestic markets and international market were measured using the Johansen cointegration test and the error correction model. Empirical results for the soybean prices presented the state of Rio Grande do Sul as the market that more rapidly adjusts to international market prices, at a rate of speed of 55%. Soybean prices in the state of Goiás corrected at a rate of 40%, Mato Grosso at a rate of 46%, and Paraná at a rate of speed of 55%. In terms of corn prices, the state of Goiás was the first to arrive at equilibrium with those of CBOT, at a rate of speed of 1.12%. Corn prices in the state of Mato Grosso corrected at a rate of 0.67% and Paraná and Rio Grande do Sul at a rate of 0.83%. Volatility transmission was determined with the use of a lower triangular GARCH - BECK model and the Impulse Response Function. The results showed that, in the case of soybean prices, the state of Goiás was the only one that presents no evidence of volatility transmission. Evidence of volatility transmission was found from CBOT to Mato Grosso, Parana to CBOT and bi-directional transmission between CBOT and Parana. Furthermore, results of the impulse response function show that a shock in the international soybean prices on prices of the State of Goiás did not normalize within a period of twenty four months. Other domestic markets showed a tendency to stabilize on an average of twenty months. In the case of corn prices, evidence of bi-directional volatility transmission was found between CBOT prices and Goias, Mato Grosso and Parana. Volatility transmission was unidirectional for Rio Grande do Sul and CBOT. The reaction to a shock in prices in the international market showed that the persistence of the shock in the domestic markets lasted an average of ten days before normalizing. The results show that price and volatility transmission between the domestic markets for the commodities analyzed and CBOT do exist and new information within the individual markets play a bigger role on returns volatility than new information from CBOT. / Este estudo apresenta uma análise empírica de transmissão de preços e de volatilidade nos preços da soja e do milho entre o mercado internacional, representado pela CBOT, e quatro mercados domésticos no Brasil: o Estado de Goiás, Mato Grosso, Paraná e Rio Grande do Sul. Para isso, foram selecionados os preços diários da soja e do milho, para o período entre janeiro de 2008 e junho de 2013. Os preços foram obtidos junto ao Centro de Estudos Avançados de Economia Aplicada e o Instituto de Economia Agrícola; em seguida, foram convertidos em retornos e logaritimizados para as análises. Posteriormente, foi feita uma análise preliminar dos preços nominais para avaliar o comportamento das séries temporais, em que foi verificada a estacionariedade de ordem (1) para todas as séries de preços. Foi também constatada uma alta correlação entre o mercado internacional e os mercados domésticos. O comovimento e a velocidade da transmissão dos preços foram estimados mediante o uso do teste de cointegração de Johansen e o modelo de correção de erros. Os resultados apontaram uma cointegração entre os mercados domésticos e o mercado internacional para as duas culturas. Os resultados empíricos dos testes para os preços da soja mostraram que o Estado do Rio Grande do Sul é o mercado que mais rapidamente se ajusta e se equilíbra com os preços da CBOT, numa velocidade de 55%. Os preços da soja no Estado de Goiás se ajustam a uma velocidade de 40%, o de Mato Grosso a uma velocidade de 46%, e o Paraná a uma velocidade de 55%. Quanto aos preços do milho, o Estado de Goiás é o que mais rapidamente se equilibra com os preços da CBOT, com uma velocidade de 1,12%. Os preços do Mato Grosso se corrigem a uma velocidade do 0,67% e os mercados do Paraná e Rio Grande do Sul a uma velocidade de 0,83%. A análise empírica da transmissão de volatilidade foi estimada pelo uso do modelo GARCH-BECK triangular inferior. Os resultados para a soja apontam que o mercado do Estado de Goiás foi o único que não apresentou evidência de transmissão de volatilidade. Existência de transmissão de volatilidade foi encontrado da CBOT para Mato Grosso, do Paraná para CBOT, e bidirecional entre Rio Grande do Sul e CBOT. Além disso, os resultados da Função Resposta ao Impulso mostram que um choque do mercado internacional no mercado do Estado de Goiás não chega à estabilidade em um período de vinte e quatro meses. Os outros mercados domésticos mostraram uma tendência de se estabilizar, em média, a partir de vinte meses. No caso do milho, foram encontradas evidências de transmissão de volatilidade bidirecional nos Estados de Goiás, Mato Grosso e Paraná, e transmissão unidirecional de Rio Grande do Sul para CBOT. A reação a um choque da CBOT mostra que a persistência do choque nos mercados domésticos leva, em média, dez dias para se estabilizar. Portanto, os resultados mostram que existe transmissão de preços e de volatilidade entre os mercados domésticos para os commodities analisados com a CBOT, além do que as novas informações dos proprios mercados possuem maior papel na volatilidade dos retornos que das informações da CBOT.

Doctor of Philosophy / Economics / Steven P. Cassou / The increase in commodity prices that has taken place in the past decade or so has resulted in renewed interest in the debate about the macroeconomic consequences of such price increase. Previous studies tend to assume that all commodity price shocks are alike and advocate a “one size fit all” policy response by monetary authorities, either by means of contractionary monetary policy to alleviate inflationary pressures or doing nothing, since these shocks are believed to have insignificant economic impact. This dissertation analyses the impact of fluctuations in commodity prices on the South African economy. The first chapter studies the impact of shocks to prices of four commodities on monetary policy variables. Results show that shocks to different commodity prices have different effects on the monetary policy variables, hence rejecting the “one size fits all” policy response by monetary authorities, as some researchers have suggested. Chapter two investigates the sectorial effects of commodity price shocks. The Dutch Disease hypothesis suggests that a boom in the natural resource sector shrinks the manufacturing sector through crowding out and appreciation of the real exchange rate. South Africa is a major exporter of a large number of commodities. Using a structural VAR framework this chapter analyzes the impact of shocks to different commodity prices on the production and employment levels in the manufacturing and mining sectors in South Africa. The results show that the commodity price boom has had a positive impact on both sectors, hence the manufacturing sector did not experience signs of the Dutch disease. Chapter three examines the volatility transmission between commodity prices and nominal exchange rate in South Africa. This chapter uses conditional and realized volatility models to estimate volatility in exchange rate, gold, platinum, oil, palladium and silver prices and then employs Granger-causality, Impulse Response analysis, Variance Decomposition and Ordinary Least Squares to analyze the volatility transmission from the commodity prices to the nominal exchange rate. The results show that there is volatility transmission from commodity prices to the nominal exchange rate, hence knowing the volatility in commodity prices would improve investor’s ability to manage risk in South Africa.

Coordenação de Aperfeiçoamento de Pessoal de Nível Superior / This work seeks to analyze at different frequencies, the transmission of volatility in the prices of crude oil produced by OPEC members and other producing and exporting countries that are not part of this organization and to analyze the presence of structural breaks in dynamic correlation between crude oil spot and future prices. The Wavelets methodology employed aims to decompose the series to verify its behavior at different frequencies, revealing additional information or confirming trends. To check the transmission process of the volatility it is proposed the application of Granger Causality Test. This made it possible to understand the functioning of this important market and answer the following question: How behaves the volatility of oil prices when analyzed considering several time horizons in an analysis in the frequency domain? The analysis of volatility transmission shows a strong integration of the international oil market, the correlation structural breaks tests results shows that structural break point is not static for any analysis, it moves, depending the frequency scale and the time window. / Este trabalho busca analisar em diferentes frequências, o sentido e a transmissão da volatilidade nos preços do petróleo bruto produzido pelos países membros da OPEP (Organização dos Países Exportadores de Petróleo) e dos demais países produtores e exportadores que não fazem parte desta organização; bem como analisar a presença de quebras estruturais na correlação dinâmica entre os preços à vista e futuro do petróleo. A metodologia de Wavelets empregada tem por objetivo decompor as séries estudas a fim de verificar seu comportamento em diferentes frequências, revelando informações adicionais ou confirmando tendências observadas. Para a verificação do processo de transmissão da volatilidade foi proposta a utilização do método de Causalidade de Granger. Desta forma foi possível compreender o funcionamento deste importante mercado e responder a seguinte questão: Como se comporta a volatilidade do preço do petróleo quando se analisam variados horizontes de tempo em uma análise no domínio da frequência? A análise da transmissão da volatilidade aponta para uma forte integração do mercado internacional do petróleo, enquanto o resultado da análise das quebras na correlação mostra que o ponto de quebra estrutural não é estático para toda e qualquer análise, ele se move, dependendo da frequência e do horizonte temporal.