Prior research has provided evidence that the return generating process on the Johannesburg Stock Exchange (JSE) is dichotomous in nature (Campbell, 1979; Gilbertson and Goldberg, 1981;Carter, 1983; ...Page, 1986, 1989; Venter, Bradfield and Bowie, 1992). More specifically, this prior work supports the contention that there exists a cleavage in the economic forces underlying returns on the mining and industrial sectors of the JSE.
In this paper the implications are considered for financial researchers applying linear factor models (LFMs) to describe the return generating processes underlying both mining and industrial shares on the JSE. A factor analytic augmentation to LFMs using prespecified explanatory variables is motivated. This suggestion is applied to the LFM underlying the Ross (1976) APT and it is empirically examined to what extent the factor analytic augmentation contributes to explaining both the time series and cross section of JSE returns.
This paper contains a critical review of the uncertainty research, and reports on the relationship between corporate disclosure and the adverse selection component of the buy-sell (bid-ask) spread of ...stock prices. Order processing and holding costs will be decoupled from information component following Gloston's definition of spread, and using the George, Kaul and Nimalendran model. Results indicate that there is some evidence of association between the level of disclosure through annual reports and the size of information asymmetry, but further tests for the putative association between the two variables do not show strong linearity.
This paper contains a critical review of the uncertainty research, and reports on the relationship between corporate disclosure and the adverse selection component of the buy-sell (bid-ask) spread of ...stock prices. Order processing and holding costs will be decoupled from information component following Gloston's definition of spread, and using the George, Kaul and Nimalendran model. Results indicate that there is some evidence of association between the level of disclosure through annual reports and the size of information asymmetry, but further tests for the putative association between the two variables do not show strong linearity.
The earlier versions of this paper were delivered at the July 2000 Biennial Congress of the Southern African Accounting Association and at the 8, h Annual Conference of the Southern African Finance Association. Valuable comments were received from the participants of those conferences. I am also grateful to Leon Brummer, Willie Hamman, David Fryer, Vanessa Sam and Jenny Doke for supplying data and helping me with the computer.
This paper investigates stock price associations between the world's sixteen largest international markets in the period immediately before and after the 1987 market crash, as well as in a more ...recent post-crash period. The analysis suggests that the crash had the following effects on stock market interrelationships. Firstly, we find that international markets developed distinctly stronger links with one another following the crash and most particularly with the New York Stock Exchange (NYSE). Secondly, our analysis suggests that stock market interrelationships may be seen to follow a clear regional configuration, not only during the period around the crash, but also more generally. In particular, our analysis identifies four important regional stock market groups: emerging markets in East Asia-Oceania; established markets in Europe, and in North America; and the relatively independent markets in Tokyo, Brussels and Milan. Stock markets within a particular group exhibit definite common behaviour attributes. This observation suggests that the potential for the international diversification of equity portfolios has a distinct regional profile, corresponding closely with a small number of geographical areas. Thirdly, the Johannesburg Stock Exchange (JSE) followed emerging market behaviour very closely during the October 1987 crash, although more generally, the JSE's behaviour appears to be dominated by the influence of the NYSE. Finally, we investigate the immediate vicinity of the 198? crash, and examine the role of the gold price as a mechanism which insulates the JSE from international financial disturbances.
This paper tests whether there is an equilibrium relationship between prices and earnings on the Johannesburg Stock Exchange (JSE). Such a relationship would hold if the JSE Index and index earnings ...were cointegrated, A full explanation of the technique of cointegration is provided. It is shown that prices and earnings on the JSE are not cointegrated, which is aconsistent with similar results obtained for the New York Stock Exchange. The paper then offers a more general explanation of prices on the JSE to include, in addition to earnings, the influence of world markets and political and exchange rate risk, on the value of the JSE as represented by its Industrial and Financial Index. It is found that the variables of these models of the JSE are in fact cointegated. This means that there have been forces driving long term equilibrium values on the JSE. Movements away from such equilibrium values have represented market beating opportunities Current prices are thus not the best estimate of future prices, suggesting that the JSE cannot be regarded as an efficient market.
This paper addresses the question of investment in sub-Saharan African listed securities by examining characteristics of the continent’s 15 equity markets, the rise and fall of African regional ...funds, and the asset allocation trends for global emerging market (GEM) funds. The data shows that South Africa is now a leading destination of capital, but that few managers invest elsewhere on the continent. However, we find that African markets are not treated differently than other markets and present evidence that small market size and low levels of liquidity are a binding deterrent for foreign institutional investors. Thus, orthodox market variables rather than market failure appear to explain Africa’s low absolute levels of inward equity flows. The paper then turns to new data from firm surveys to explore why African firms remain small. The implications of our findings are threefold: (a) efforts to encourage greater private investment in these markets should concentrate on domestic audiences and specialized regional funds, (b) the depth and success of the Johannesburg Stock Exchange can perhaps be better utilized to benefit other parts of the continent, and (c) any long-term strategy should concentrate on the underlying barriers to firm entry and growth.
The Top 25 Southern African by market value are all South African; so as always, the publication includes a regional Southern African table that excludes the continent's biggest companies. Although ...it ranks much lower in terms of daily trading, the Johannesburg Stock Exchange is the 18th biggest bourse in the world by constituent market capitalisation and totally overshadows its neighbours. For the first time, the publication has decided to include Mauritius within Southern Africa, as it has stronger economic ties with Southern Africa than with the Eastern African region, where they previously placed it. Mauritius Commercial Bank takes top spot with an increase in market value from $1.7bn to $2bn since our last survey. Second-placed State Bank of Mauritius has also increased in value, from $1.2bn to $1.3bn over the same period. The IMF believes that Mauritius is on course to become a high-income country in a matter of years.
The South African economy, like other countries, has taken a battering - but it is proving surprisingly resilient. And, for the adventurous and ingenious, South Africa still provides one of the best ...opportunities for making money. A shining statistic in South Africa's recent economic performance is the hefty balance of payments surplus, a condition brought about by the fall in the rand, making South Africa's exports a bargain hunter's dream. However, although it imparts a comforting glow, the governor warns that the depreciation of the exchange rate provides no panacea for the domestic economic growth problems of South Africa. South Africa needs to address the level of government debt, trade union wage demands, employment equity plans, the lag in social priorities. All of these have a direct bearing on how investors view the country.
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