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Value investing and the business cycle in the South African context

Thesis (MBA)--University of Stellenbosch, 2010. / AFRIKAANSE OPSOMMING: Waarde- en groei-beleggingstrategieë dateer terug na Fama en French (1992) en Lakonishok,
Shleifer en Vishny (1994). Bogenoemde studies is gebaseer op vroeë navorsing wat die fokus
verskuif het om sodoende waardasieverhoudinge en maatskappygrootte te gebruik as
toonaangewende verklarende maatstawwe vir aandele-opbrengste. Toenemende studies in hierdie
beleggingsveld het die akademiese en beleggingsgemeenskap oortuig dat ’n waardegebaseerde
beleggingstrategie, gemiddeld, ’n groeigebaseerde beleggingstrategie oortref.
Waarde- en groei-eienskappe word algemeen aanvaar en deur fondsbestuurders en beleggers as
onderskeidende beleggingstrategieë aangewend. Hierdie eiesoortige beleggingstrategieë is op die
Suid-Afrikaanse mark vir die periode 1990 tot 2009 toegepas. Die beduidende veranderinge binne
die ekonomiese klimaat en aandelemarkte was die oorhoofse rede vir die insluiting van die
ekonomiese siklusse in die navorsing, spesifiek die opswaai- en afswaai-fases van die ekonomie.
Die Sharpe-, Treynor- en Inligting–prestasiemaatstawwe vir waarde- en groei-portefeuljes is in
hierdie studie vergelyk en geanaliseer.
Normaalweg word prestasie-beoordeling nie begin met ’n gedetailleerde analise van die
opbrengsverdelings om te bepaal watter prestasie-maatstaf meer voortreflik is nie. Die opbrengsdensiteit
vir alle portefeuljes is bepaal om sodoende die opbrengsverspreidings en risikooorwegings
beter te verstaan binne die onderskeie ekonomiese siklusse.
Die bevindinge binne die Suid-Afrikaanse konteks was wel ooreenstemmend met voorafgaande
navorsing dat waardegebaseerde investering groeigebaseerde investering oortref vir aandele met
hoër waardasieverhoudinge teenoor aandele met laer waardasieverhoudinge. Die gemiddelde
maandelikse prestasie van waarde-portefeuljes het ook groei-portefeuljes oortref in die
ekonomiese opswaai-siklusse, wat ooreenstemmend is met soortgelyke navorsing wat in ander
markte gedoen is. In die ekonomiese afswaai-siklus het groei-portefeuljes waarde-portefeuljes
oortref, ooreenstemmend met die van die Amerikaanse mark.
Die navorsing dui daarop dat waardegebaseerde investering voortreflik is oor die volle
steekproefperiode, wat beteken dat beleggers wat waarde-beleggingstrategieë volg hoër
opbrengste kan verwag in alle ekonomiese siklusse, maar die voordele sal groter wees in tye van
’n ekonomiese opswaai. Die wisselvalligheid van opbrengste binne die twee ekonomiese siklusse
is sigbaar en beklemtoon die noodsaaklikheid om die ekonomiese siklus in beleggingstrategieë en
-besluite in te sluit.
Die ekonomiese siklus verbreed die dimensie tot die evaluasie van waardegebaseerde
beleggingstrategie en dit is noodsaaklik dat dit ’n geïntegreerde deel vorm van die
evaluasieproses. / ENGLISH ABSTRACT: Value and growth investment strategies can be traced back to Fama and French (1992) and
Lakonishok, Shleifer and Vishny (1994). The studies built on earlier work done and lead to
attention being shifted to valuation ratios and company size as leading explanatory indicators for
stock returns. Based on the accumulated evidence from studies, the academic and investment
community came to agree that value investment strategies, on average, outperform growth
investment strategies.
Value and growth, are widely recognised and used by money managers and investors as
distinctive investment strategies. These style-specific investment strategies were tested on the
South African market for the period 1990 to 2009. The significant changes within the economic
conditions and securities markets motivated the research to include the business cycle –
specifically, contraction and expansion of the economy – within the scope of this study. The
Sharpe, Treynor and Information performance ratios, that were calculated for compiled value and
growth portfolios, were compared and analysed.
The performance evaluation is not normally initiated with a detailed analysis of the return
distribution in order to determine which performance measure is superior. The return densities for
all portfolios were calculated in order to gain a better understanding of return distributions and risk
considerations within the different business cycles.
The results indicated that, within the South African context, value investing did outperform growth
investing as indicated by previous research that stocks with high valuation ratios tend to
outperform stocks with low valuation ratios. The mean monthly performance of value portfolios also
outperformed growth portfolios in the period of economic upswing, which is a similar result as that
of other markets where this kind of research has been conducted. In the economic downturn period
growth investing seems to be superior to value investing similar to that of the US market.
The study indicates that the superior performance of value investing is robust for the whole sample
period, meaning that investors will be better off investing in stocks with high valuation ratios for all
economic conditions, but the benefits of value investing would be greater during periods of
economic upswing. The volatility of returns within the two economic conditions is quite evident and
highlights the importance of incorporating business cycles into investment strategies and
decisions.
The business cycle adds another dimension to value investing strategy evaluation and should be
incorporated in the evaluation process.

Identiferoai:union.ndltd.org:netd.ac.za/oai:union.ndltd.org:sun/oai:scholar.sun.ac.za:10019.1/8470
Date12 1900
CreatorsKirsten, Rudo Stefan
ContributorsSmith, J. du P., University of Stellenbosch. Faculty of Economic and Management Sciences. Graduate School of Business.
PublisherStellenbosch : University of Stellenbosch
Source SetsSouth African National ETD Portal
Languageen_ZA
Detected LanguageUnknown
TypeThesis
RightsUniversity of Stellenbosch

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