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The impact of shorter settlement period on risk and liquidity: the case of Johannesburg Stock Exchange

A research report submitted to the Faculty of Commerce, Law and Management, University of the Witwatersrand, Johannesburg, in partial fulfilment of the requirements for the degree of Master of Management in Finance and Investment, 2017 / Capital markets reforms in emerging, and particularly African markets are of
a growing concern. Despite various institutional reforms that began in the
early 1980s, the capital markets in emerging countries still exhibit signs of
illiquidity, high volatility of returns, high concentration levels and
inefficiency. Ambiguous results for such reforms have brought into question
the affectivity of major capital markets reforms such as change of settlement
cycles, particularly in countries where stock markets are sponsored with
public funds. This thesis, therefore, intends to assess the effectiveness of
capital markets reforms on development of stock markets by looking at the
impact of changing settlement cycle on risk and liquidity at JSE. The
objective is met through an assessment of a link between institutional
structures and stock micro-structural variables, especially liquidity and risk
in the literature review and an assessment of past studies on effects of stock
market reforms and changes of settlement cycle on liquidity, risk and
efficiency of stock markets. The study then tests the effects of settlement
cycle on risk by assessing changes in abnormal returns and changes of
variance of returns as a result of settlement cycle change at JSE. It also looks
at the impact on liquidity by assessing the effects on the illiquidity measure
first proposed by Amihund and Mendeison (2002). The study finds that
change of settlement cycle at JSE had positive effects of reducing risk and
increasing liquidity. The study also finds that there are no effects on trading
activity and concludes that changing settlement cycle impacts largely on risk
and to a smaller extend liquidity. / MT 2019
Date January 2017
CreatorsMarumo, Nkhahle
Source SetsSouth African National ETD Portal
Detected LanguageEnglish
FormatOnline resource (62 leaves), application/pdf

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