This paper investigates the properties of South African stock returns and the underlying variance. The investigation into the properties of stock returns and the behaviour of the variance underlying ...returns is undertaken using model-free approaches and through the application of ARCH/GARCH models. The results indicate that, as with other stock markets, returns on the South African stock market depart from normality and that variance displays evidence of heteroscedasticity, long memory, persistence, and asymmetry. Applying the EGARCH(p,q,m) and IGARCH(p,q) specifications confirms these findings and the application of these models suggests differing characteristics for variance structures underlying the South African stock market. In light of the findings relating to the properties of stock returns and the characteristics of variance and its structure, implications are outlined, and recommendations on how time-series specifications may be estimated are made.
The COVID-19 pandemic has caused extreme volatility in financial markets globally. During periods of extreme volatility, investors tend to exhibit herd behaviour. However, herd behaviour results in ...market anomalies, which causes incorrect valuations and pricing. Hence, the objective of this study is to test whether COVID-19 has induced herd behaviour in South Africa’s stock market. To achieve this objective, the FTSE/JSE Top 40 Index is used as a proxy for stocks trading on the Johannesburg Stock Exchange. The cross-sectional absolute deviation (CSAD) methodology is employed, and the sample period ranges from July 3, 2017 to June 30, 2021 with March 5, 2020 dividing the pre- and post-COVID-19 periods. The results suggest an absence of herd behaviour in the FTSE/JSE Top 40 Index during the full, pre- and post- COVID-19 sample periods. Therefore, this study concludes that the COVID-19 pandemic has not induced herd behaviour in the South African stock market. This could indicate that stock investors on the JSE follow their own thought and decision-making processes in periods of extreme volatility. Moreover, this may suggest that the South African stock market is efficient and that investors execute rational and well-thought out trades.
This article examines the relationship between ownership concentration as a proxy to alleviating agency costs on the performance of the JSE-TOP40 listed companies from 2010-2018. The two-step ...generalised method of moments methodology was employed to examine the nexus. The results revealed that foreign ownership does not influence company performance. Whereas performance was found to deteriorate with increase in managerial ownership. In many instances, companies are encouraged to align the managerial ownership with company performance by choosing to shorten or prolong their vesting period. Therefore, future studies might need to empirically study the same relationship accounting for management share option schemes.
The research paper examines the effects of forecasting on the financial statement adjustment for retail stores in KwaZulu-Natal, South Africa. The study used quantitative design method. A ...questionnaire was designed for this study and 200 copies were issued to five respondents per retail store in each of the two different branches of the 20 stores in KwaZulu-Natal listed on the Johannesburg Stock Exchange. The Exploratory Factor Analysis was employed in this study. Furthermore, a regression test was prepared to estimate the effect of the independent variable on the dependent variable. The findings showed that pricing and inventory forecasting cause financial statements adjustment in retail stores. Thus, it was concluded that retail store forecasts will influence the business flow cycle if mismanaged. To have more reliable financial statements, adjustments have to be made accordingly. Smooth operations in retail is highly dependent on future predictions.
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•DCC-GARCH confirmed positive Rényian’s transfer entropy between BRVM and ESG stock.•CEEMDAN deposed the returned series into nine intrinsic mode functions and a residual.•Rényian’s ...transfer entropy showed a mixture of significant and insignificant values.•Low effective Rényian’s transfer entropy values indicate African stocks are less integrated.•Diversification can happen in the long term between BRVM and ESG stocks.
This paper seeks to analyze the information flow between the Bourse Régionale des Valeurs Mobilières (BRVM) and Environmental, Social, and Governance (ESG) stocks, focusing on the time and frequency domains. By studying these aspects, we aim to gain a deeper understanding of how information is transmitted between BRVM and ESG stocks, shedding light on the dynamics and interactions within this context. The study analyzes the decomposed daily returns of four indices: BRVM Composite Index (BRVMCI), BRVM 10 Index (BRVM10), FTSE/JSE SA All Share Index (FTSEJSE), and FTSE/JSE Top 30 Responsible Investment Index (FTSERI). We employed Rényi transfer entropy estimates to measure the information flow between the stocks returns.
To ensure the robustness of the findings, the study also utilizes the Dynamic Conditional Co-variance-Generalized autoregressive Conditional Heteroscedasticity (DCC-GARCH) method. The study covers the period from June 23, 2014, to April 22, 2022. The results showed positive information flow but a mixture of significant and insignificant transfer entropies. The decomposed findings give evidence to reject the null hypothesis of no information flow in the short-and medium-terms but not in the longterm.
The exchange of seemingly insignificant information among stocks presents opportunities for fund managers to diversify their portfolios across various time frames.
To expedite economic growth and lower equity costs, institutional leaders should collaborate with governments to establish economic and political foundations that integrate markets. Such integration would yield benefits for both markets, but the BRVM stands to gain more due to its less developed and illiquid nature.
In this paper, the use of artificial neural networks (ANNs) is proposed to approximate the option price sensitivities of Johannesburg Stock Exchange (JSE) Top 40 European call options in a classical ...and a modern multi-curve framework. The ANNs were trained on artificially generated option price data given the illiquid nature of the South African market, and the out-of-sample performance of the optimized ANNs was evaluated using an implied volatility surface constructed from published volatility skews. The results from this paper show that ANNs trained on artificially generated input data are able to accurately approximate the explicit solutions to the respective option price sensitivities of both a classical and a modern multi-curve framework in a real-world out-of-sample application to the South African market.
Small and medium enterprises (SMEs) serve as pivotal drivers of global economic growth, a consensus reiterated by influential scholars. Yet, a critical challenge impeding their progress is the ...limited access to capital financing, hampering the expansion prospects of countless small businesses worldwide. In South Africa, this dilemma is especially pronounced, with many SMEs either struggling or shuttering due to financial constraints. The Johannesburg Stock Exchange (JSE) devised a solution: The Alternative Exchange (AltX), a dedicated platform designed to ease capital financing for SMEs and boost their growth. In this study, we used secondary data obtained from the lower bourse, as well as other relevant databases for the period 2003 to 2019 to ascertain its impact on SME performance. Eviews 12 statistical software package was used to carry out an Ordinary Linear Regression (OLS) empirical analysis. We find that SME listing positively influences small business performance in South Africa. Furthermore, these listed firms' continued expansion is propelling them to become larger enterprises within a remarkably short span, transcending national borders. Our results robustly affirm a positive correlation between AltX listing, market capitalization, revenue, their Broad-Based Black Economic Empowerment (B-BBEE) score, Earnings Before Interest, Taxes, Depreciation, and Amortization (EBITDA), and improved SME performance. Moreover, this contributes to the existing literature by empirically proving that the boost in SME performance aligns with heightened GDP growth, suggesting a symbiotic relationship between the two. We recommend that policymakers should offer incentive schemes to enhance their performance given its impact on sustainable national growth and development.
The importance of heeding the environmental sustainability commitment call cannot be underestimated. Laggards in terms of environmental sustainability commitment are likely to face fines and ...penalties as talks to tighten environmental legislation are now at an advanced stage globally. The current work assessed the link between environmental sustainability commitment and financial performance of firms listed on the Johannesburg Stock Exchange (JSE). The study was quantitative in nature with a case study research design. The longitudinal design was adopted where the researcher collected panel data from 2011-2018. The population of the study included all firms listed on the JSE Responsible Investment Index in South Africa. The sample constituted of 32 firms listed on the Financial Times Stock Exchange FTSE/JSE Responsible Investment Index in South Africa. The researchers employed the panel regression analysis model to analyze the data. Specifically, the Feasible Generalized Least Squares regression model was used in this study. Financial performance was treated as the dependent variable as measured by earnings per share and share price. The independent variables of the study included components of environmental sustainability such as carbon emission reduction and environmental compliance. Control variables such as firm size and liquidity were used in the study. The findings indicated that carbon emission reduction was positively and significantly related to earnings per share and share price. The findings further exhibited that environmental compliance was positively related to earnings per share and share price. It was concluded that firms can enhance their financial performance from environmental investment as all the hypotheses were supported. This study contributes practically towards shaping environmental policies and it also serves as motivation to listed companies that they can enhance both their profitability and market value from environmental investments.
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