An empirical analysis of the asset price monetary policy transmission channel in South Africa
- Authors: Du Preez, Wilhelmus Petrus
- Date: 2021-10
- Subjects: Monetary policy South Africa , Banks and banking, Central South Africa , Transmission mechanism (Monetary policy) South Africa , Capital assets pricing model , Securities South Africa , Stocks Prices South Africa , Repurchase agreements South Africa
- Language: English
- Type: Master's theses , text
- Identifier: http://hdl.handle.net/10962/190318 , vital:44983
- Description: The asset pricing channel of monetary policy transmission breeds an interesting study. There has been an ongoing debate to determine whether monetary policy committees should directly influence the asset pricing channel through changes in the central bank control interest rate or whether monetary policy committees should refrain from targeting the asset pricing channel to meet their policy objectives. The study aims to critically analysis the asset pricing channel, firstly on a global context to set the scene and then to critically focus on the study performed by Muroyiwa et al. (2017) who conducted a study on the South African monetary policy and its interdependence on the stock market through utilisation of an SVAR model. It was concluded that monetary policy does significantly influence stock prices. The purpose of this study is to build on the results which have been formed by Muroyiwa et al. (2017) and to expand on the period under analysis which encapsulates 1999:01 to 2007:12 in order to conclude whether there are conflicting conclusions or conclusions which build on what has already been done. The results from the research shows that when the monetary policy committee decides to influence changes in the repo rate, the repo rate will have a direct effect on the asset markets, the indexes that were used to represent the asset market are the all share index, industrial 15 index and the financial 15 index. Furthermore. The study which has expanded the period under analysis has supplemented and built on the results provided by Muroyiwa et al. (2017). , Thesis (MCom) -- Faculty of Commerce, Economics and Economic History, 2021
- Full Text:
- Date Issued: 2021-10
- Authors: Du Preez, Wilhelmus Petrus
- Date: 2021-10
- Subjects: Monetary policy South Africa , Banks and banking, Central South Africa , Transmission mechanism (Monetary policy) South Africa , Capital assets pricing model , Securities South Africa , Stocks Prices South Africa , Repurchase agreements South Africa
- Language: English
- Type: Master's theses , text
- Identifier: http://hdl.handle.net/10962/190318 , vital:44983
- Description: The asset pricing channel of monetary policy transmission breeds an interesting study. There has been an ongoing debate to determine whether monetary policy committees should directly influence the asset pricing channel through changes in the central bank control interest rate or whether monetary policy committees should refrain from targeting the asset pricing channel to meet their policy objectives. The study aims to critically analysis the asset pricing channel, firstly on a global context to set the scene and then to critically focus on the study performed by Muroyiwa et al. (2017) who conducted a study on the South African monetary policy and its interdependence on the stock market through utilisation of an SVAR model. It was concluded that monetary policy does significantly influence stock prices. The purpose of this study is to build on the results which have been formed by Muroyiwa et al. (2017) and to expand on the period under analysis which encapsulates 1999:01 to 2007:12 in order to conclude whether there are conflicting conclusions or conclusions which build on what has already been done. The results from the research shows that when the monetary policy committee decides to influence changes in the repo rate, the repo rate will have a direct effect on the asset markets, the indexes that were used to represent the asset market are the all share index, industrial 15 index and the financial 15 index. Furthermore. The study which has expanded the period under analysis has supplemented and built on the results provided by Muroyiwa et al. (2017). , Thesis (MCom) -- Faculty of Commerce, Economics and Economic History, 2021
- Full Text:
- Date Issued: 2021-10
A study of the Consumption Capital Asset Pricing Model's appilcability across four countries
- Spurway, Kayleigh Fay Nanette
- Authors: Spurway, Kayleigh Fay Nanette
- Date: 2014
- Subjects: Econometric models , Capital assets pricing model , Investments , Econometric models -- Germany , Econometric models -- South Africa , Econometric models -- Great Britain , Econometric models -- United States
- Language: English
- Type: Thesis , Masters , MCom
- Identifier: vital:1095 , http://hdl.handle.net/10962/d1013016
- Description: Historically, the Consumption Capital Asset Pricing Method (C-CAPM) has performed poorly in that estimated parameters are implausible, model restrictions are often rejected and inferences appear to be very sensitive to the choice of economic agents' preferences. In this study, we estimate and test the C-CAPM with Constant Relative Risk Aversion (CRRA) using time series data from Germany, South Africa, Britain and America during relatively short time periods with the latest available data sets. Hansen's GMM approach is applied to estimate the parameters arising from this model. In general, estimated parameters fall outside the bounds specified by Lund & Engsted (1996) and Cuthbertson & Nitzsche (2004), even though the models are not rejected by the J-test and are associated with relatively small minimum distances.
- Full Text:
- Date Issued: 2014
- Authors: Spurway, Kayleigh Fay Nanette
- Date: 2014
- Subjects: Econometric models , Capital assets pricing model , Investments , Econometric models -- Germany , Econometric models -- South Africa , Econometric models -- Great Britain , Econometric models -- United States
- Language: English
- Type: Thesis , Masters , MCom
- Identifier: vital:1095 , http://hdl.handle.net/10962/d1013016
- Description: Historically, the Consumption Capital Asset Pricing Method (C-CAPM) has performed poorly in that estimated parameters are implausible, model restrictions are often rejected and inferences appear to be very sensitive to the choice of economic agents' preferences. In this study, we estimate and test the C-CAPM with Constant Relative Risk Aversion (CRRA) using time series data from Germany, South Africa, Britain and America during relatively short time periods with the latest available data sets. Hansen's GMM approach is applied to estimate the parameters arising from this model. In general, estimated parameters fall outside the bounds specified by Lund & Engsted (1996) and Cuthbertson & Nitzsche (2004), even though the models are not rejected by the J-test and are associated with relatively small minimum distances.
- Full Text:
- Date Issued: 2014
Valuation of banks in emerging markets: an exploratory study
- Authors: Sabilika, Keith
- Date: 2014
- Subjects: Banks and banking -- Valuation , Banks and banking -- Valuation -- Developing countries , Discounted cash flow , Capital assets pricing model , Capital -- Developing countries
- Language: English
- Type: Thesis , Masters , MCom
- Identifier: vital:1200 , http://hdl.handle.net/10962/d1013057
- Description: Practitioners and academics in emerging markets are yet to agree on how best they can value companies in emerging markets. In contrast, academics and practitioners in developed markets seem to agree on mainstream valuation practices (Bruner, Eades, Harris and Haggins, 1998; Graham and Harvey, 2001). This study was therefore aimed at achieving such consensus with particular attention being paid to the emerging market banks. Emerging market banks are by no means small and are growing fast. Furthermore, these banks are currently involved in lots of cutting age economic activities such as mergers and acquisitions (M&A), joint ventures and strategic alliances which require sound valuation practices that are based on empirical evidence. The primary purpose of this research was to establish consensus of opinion among experts with regard to the valuation of banks in emerging markets. To achieve the purpose of this study the Delphi technique, which is a structured survey method that relies on a panel of experts to answer questionnaires in two or more Delphi rounds, was used to gather data and develop consensus among experts (Kalaian and Kasim, 2012). The main findings in this study pertain to aspects concerning the type of analysis considered by experts when analysing the performance of banks, how experts compare the discounted cash flow (DCF) approach to multiples valuation approach, the challenges encountered by experts when valuing banks in emerging markets, and how experts compute the cost of capital for banks in emerging markets. The main findings of this study can be summarised as follows: ∙ When analyzing the performance of banks, it is essential to conduct a bank-specific, industry and macroeconomic analysis; ∙ When estimating the future performance of banks, the time series analysis and an explicit forecast period of between 4-10 years may be used; ∙ When estimating the terminal value for banks in emerging markets, the perpetuity with growth is used; ∙ When computing the value for banks, the DCF valuation approach (equity DCF and DDM valuation models) are used as primary valuation methods and the relative valuation approach (P/E and P/BV ratio) are used as secondary valuation methods; ∙ The DCF valuation approach is considered as more accurate and popular when valuing banks in emerging markets; and ∙ When estimating the cost of equity, the capital asset pricing model (CAPM) is used.
- Full Text:
- Date Issued: 2014
- Authors: Sabilika, Keith
- Date: 2014
- Subjects: Banks and banking -- Valuation , Banks and banking -- Valuation -- Developing countries , Discounted cash flow , Capital assets pricing model , Capital -- Developing countries
- Language: English
- Type: Thesis , Masters , MCom
- Identifier: vital:1200 , http://hdl.handle.net/10962/d1013057
- Description: Practitioners and academics in emerging markets are yet to agree on how best they can value companies in emerging markets. In contrast, academics and practitioners in developed markets seem to agree on mainstream valuation practices (Bruner, Eades, Harris and Haggins, 1998; Graham and Harvey, 2001). This study was therefore aimed at achieving such consensus with particular attention being paid to the emerging market banks. Emerging market banks are by no means small and are growing fast. Furthermore, these banks are currently involved in lots of cutting age economic activities such as mergers and acquisitions (M&A), joint ventures and strategic alliances which require sound valuation practices that are based on empirical evidence. The primary purpose of this research was to establish consensus of opinion among experts with regard to the valuation of banks in emerging markets. To achieve the purpose of this study the Delphi technique, which is a structured survey method that relies on a panel of experts to answer questionnaires in two or more Delphi rounds, was used to gather data and develop consensus among experts (Kalaian and Kasim, 2012). The main findings in this study pertain to aspects concerning the type of analysis considered by experts when analysing the performance of banks, how experts compare the discounted cash flow (DCF) approach to multiples valuation approach, the challenges encountered by experts when valuing banks in emerging markets, and how experts compute the cost of capital for banks in emerging markets. The main findings of this study can be summarised as follows: ∙ When analyzing the performance of banks, it is essential to conduct a bank-specific, industry and macroeconomic analysis; ∙ When estimating the future performance of banks, the time series analysis and an explicit forecast period of between 4-10 years may be used; ∙ When estimating the terminal value for banks in emerging markets, the perpetuity with growth is used; ∙ When computing the value for banks, the DCF valuation approach (equity DCF and DDM valuation models) are used as primary valuation methods and the relative valuation approach (P/E and P/BV ratio) are used as secondary valuation methods; ∙ The DCF valuation approach is considered as more accurate and popular when valuing banks in emerging markets; and ∙ When estimating the cost of equity, the capital asset pricing model (CAPM) is used.
- Full Text:
- Date Issued: 2014
Modelling of size-based portfolios using a mixture of normal distributions
- Authors: Janse Van Rensburg, Stéfan
- Date: 2009
- Subjects: Capital assets pricing model
- Language: English
- Type: Thesis , Masters , MCom
- Identifier: vital:10569 , http://hdl.handle.net/10948/985 , Capital assets pricing model
- Description: From option pricing using the Black and Scholes model, to determining the signi cance of regression coe cients in a capital asset pricing model (CAPM), the assumption of normality was pervasive throughout the eld of nance. This was despite evidence that nancial returns were non-normal, skewed and heavy- tailed. In addition to non-normality, there remained questions about the e ect of rm size on returns. Studies examining these di erences were limited to ex- amining the mean return, with respect to an asset pricing model, and did not consider higher moments. Janse van Rensburg, Sharp and Friskin (in press) attempted to address both the problem of non-normality and size simultaneously. They (Janse van Rens- burg et al in press) tted a mixture of two normal distributions, with common mean but di erent variances, to a small capitalisation portfolio and a large cap- italisation portfolio. Comparison of the mixture distributions yielded valuable insight into the di erences between the small and large capitalisation portfolios' risk. Janse van Rensburg et al (in press), however, identi ed several shortcom- ings within their work. These included data problems, such as survivorship bias and the exclusion of dividends, and the questionable use of standard statistical tests in the presence of non-normality. This study sought to correct the problems noted in the paper by Janse van Rensburg et al (in press) and to expand upon their research. To this end survivorship bias was eliminated and an e ective dividend was included into the return calculations. Weekly data were used, rather than the monthly data of Janse van Rensburg et al (in press). More portfolios, over shorter holding periods, were considered. This allowed the authors to test whether Janse van Rensburg et al's (in press) ndings remained valid under conditions di erent to their original study. Inference was also based on bootstrapped statistics, in order to circumvent problems associated with non-normality. Additionally, several di erent speci cations of the normal mixture distribution were considered, as opposed to only the two-component scale mixture. In the following, Chapter 2 provided a literature review of previous studies on return distributions and size e ects. The data, data preparation and portfolio formation were discussed in Chapter 3. Chapter 4 gave an overview of the statistical methods and tests used throughout the study. The empirical results of these tests, prior to risk adjustment, were presented in Chapter 5. The impact of risk adjustment on the distribution of returns was documented in Chapter 6. The study ended, Chapter 7, with a summary of the results and suggestions for future research.
- Full Text:
- Date Issued: 2009
- Authors: Janse Van Rensburg, Stéfan
- Date: 2009
- Subjects: Capital assets pricing model
- Language: English
- Type: Thesis , Masters , MCom
- Identifier: vital:10569 , http://hdl.handle.net/10948/985 , Capital assets pricing model
- Description: From option pricing using the Black and Scholes model, to determining the signi cance of regression coe cients in a capital asset pricing model (CAPM), the assumption of normality was pervasive throughout the eld of nance. This was despite evidence that nancial returns were non-normal, skewed and heavy- tailed. In addition to non-normality, there remained questions about the e ect of rm size on returns. Studies examining these di erences were limited to ex- amining the mean return, with respect to an asset pricing model, and did not consider higher moments. Janse van Rensburg, Sharp and Friskin (in press) attempted to address both the problem of non-normality and size simultaneously. They (Janse van Rens- burg et al in press) tted a mixture of two normal distributions, with common mean but di erent variances, to a small capitalisation portfolio and a large cap- italisation portfolio. Comparison of the mixture distributions yielded valuable insight into the di erences between the small and large capitalisation portfolios' risk. Janse van Rensburg et al (in press), however, identi ed several shortcom- ings within their work. These included data problems, such as survivorship bias and the exclusion of dividends, and the questionable use of standard statistical tests in the presence of non-normality. This study sought to correct the problems noted in the paper by Janse van Rensburg et al (in press) and to expand upon their research. To this end survivorship bias was eliminated and an e ective dividend was included into the return calculations. Weekly data were used, rather than the monthly data of Janse van Rensburg et al (in press). More portfolios, over shorter holding periods, were considered. This allowed the authors to test whether Janse van Rensburg et al's (in press) ndings remained valid under conditions di erent to their original study. Inference was also based on bootstrapped statistics, in order to circumvent problems associated with non-normality. Additionally, several di erent speci cations of the normal mixture distribution were considered, as opposed to only the two-component scale mixture. In the following, Chapter 2 provided a literature review of previous studies on return distributions and size e ects. The data, data preparation and portfolio formation were discussed in Chapter 3. Chapter 4 gave an overview of the statistical methods and tests used throughout the study. The empirical results of these tests, prior to risk adjustment, were presented in Chapter 5. The impact of risk adjustment on the distribution of returns was documented in Chapter 6. The study ended, Chapter 7, with a summary of the results and suggestions for future research.
- Full Text:
- Date Issued: 2009
The current role of modern portfolio theory in asset management practice in South Africa
- Authors: Garaba, Masimba
- Date: 2005
- Subjects: Portfolio management -- South Africa , Investments -- South Africa , Bank investments -- Mathematical models , Capital assets pricing model , Asset -- Liability management , Money market -- South Africa
- Language: English
- Type: Thesis , Masters , MCom
- Identifier: vital:965 , http://hdl.handle.net/10962/d1002699 , Portfolio management -- South Africa , Investments -- South Africa , Bank investments -- Mathematical models , Capital assets pricing model , Asset -- Liability management , Money market -- South Africa
- Description: This research examines the role that modern portfolio theory (MPT) plays in current South Africa asset management practice in comparison to other portfolio management techniques and security evaluation methods. The purpose of asset management is to pool complementary financial market expertise, in order to generate returns in excess of the market return on the investments of the owners of financial resources that are entrusted to the firm, since the owners of financial resources might not be able to make superior investment decisions on their own. The research presents and discusses the literature pertaining to modern portfolio theory, traditional portfolio theory (fundamental and technical analyses), and behavioural finance theory. The implication of the efficient market hypothesis in relation to all the portfolio management theories is also presented and discussed. In line with a positivist paradigm, the survey research methodology, which combines both qualitative and quantitative aspects, was adopted. The instrument used for data collection was a questionnaire, which was found to be reliable and valid for this research. The questionnaire encompassed the Lickert scale to measure the data. The results of the analysis were interpreted using descriptive statistics. The results of this research suggest that modern portfolio theory does not play a significant role in the management of portfolios and security evaluation in South Africa. South African asset managers regard fundamental analysis as the most significant method of security evaluation in the management of portfolios. Technical analysis and econometric models are regarded as playing a moderate role and complement fundamental analysis whilst behavioural finance models play the least role. This research recommends an integrated portfolio management strategy that incorporates MPT, traditional portfolio theory and behavioural finance models to enhance investor value and protection.
- Full Text:
- Date Issued: 2005
- Authors: Garaba, Masimba
- Date: 2005
- Subjects: Portfolio management -- South Africa , Investments -- South Africa , Bank investments -- Mathematical models , Capital assets pricing model , Asset -- Liability management , Money market -- South Africa
- Language: English
- Type: Thesis , Masters , MCom
- Identifier: vital:965 , http://hdl.handle.net/10962/d1002699 , Portfolio management -- South Africa , Investments -- South Africa , Bank investments -- Mathematical models , Capital assets pricing model , Asset -- Liability management , Money market -- South Africa
- Description: This research examines the role that modern portfolio theory (MPT) plays in current South Africa asset management practice in comparison to other portfolio management techniques and security evaluation methods. The purpose of asset management is to pool complementary financial market expertise, in order to generate returns in excess of the market return on the investments of the owners of financial resources that are entrusted to the firm, since the owners of financial resources might not be able to make superior investment decisions on their own. The research presents and discusses the literature pertaining to modern portfolio theory, traditional portfolio theory (fundamental and technical analyses), and behavioural finance theory. The implication of the efficient market hypothesis in relation to all the portfolio management theories is also presented and discussed. In line with a positivist paradigm, the survey research methodology, which combines both qualitative and quantitative aspects, was adopted. The instrument used for data collection was a questionnaire, which was found to be reliable and valid for this research. The questionnaire encompassed the Lickert scale to measure the data. The results of the analysis were interpreted using descriptive statistics. The results of this research suggest that modern portfolio theory does not play a significant role in the management of portfolios and security evaluation in South Africa. South African asset managers regard fundamental analysis as the most significant method of security evaluation in the management of portfolios. Technical analysis and econometric models are regarded as playing a moderate role and complement fundamental analysis whilst behavioural finance models play the least role. This research recommends an integrated portfolio management strategy that incorporates MPT, traditional portfolio theory and behavioural finance models to enhance investor value and protection.
- Full Text:
- Date Issued: 2005
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