Stock market volatility during times of crisis: a comparative analysis of the conditional volatilities of JSE stock indices during the 2007/08 global financial crisis and COVID-19
- Authors: Wang, Zixiao
- Date: 2022-04-06
- Subjects: Stock exchanges , Johannesburg Stock Exchange , Global Financial Crisis, 2008-2009 , COVID-19 (Disease) Economic aspects , Economic forecasting , Stock exchanges and current events , GARCH model
- Language: English
- Type: Academic theses , Master's theses , text
- Identifier: http://hdl.handle.net/10962/284603 , vital:56078
- Description: This research analyses the comparative behaviour of stock market volatility during two crises. The goal of this research is to determine whether assumed cyclical and defensive sectors have either retained or revealed their expected properties during both the Global Financial Crisis (GFC) and COVID-19 by analysing sectoral volatility amid these two crises. Understanding how volatility changes amid crises helps to determine whether the volatility assumptions of diversified investment portfolios for both defensive and cyclical sectors still held given the different causes of each crisis. In turn, this knowledge can assist with risk management and portfolio allocation in stock market investments. The study can also contribute towards the enhancement of financial markets’ resistance against systemic risks through portfolio diversification, and aid government decision-making targeted at tackling the weaknesses of different economic sectors especially in times of overall economic weakness. This research makes use of the GARCH model to analyse a group of daily time series that consists of eleven sectoral indices and one benchmark index, all based on the South African stock markets. These observed series are categorised into two full sample periods, one designated to the Global Financial Crisis (January 2006 to May 2009) and the other for COVID-19 (January 2018 to May 2021). These are further divided into two sets of sub-sample periods, each made up of a pre-crisis and during-crisis. Furthermore, the dummy variables representing the occurrence of structural breaks are inserted into the full sample periods’ conditional variance equations. This is aimed at capturing the asymmetrical impact of the crises themselves on all observed series. Based on the movement of volatility persistency from pre-crisis to during-crisis for both crises, the results show that, firstly, Health Care and Consumer Goods are considered defensive Sectors. Secondly, Banks, Basic Materials, Chemicals, Telecommunications, and Financials are considered cyclical Sectors. Thirdly, Automobiles & Parts, Consumer Services, and Technology are considered indeterminable Sectors due to the inconsistent behaviour of these sectors’ volatility persistency throughout the sub-sample periods of both crises. Overall, according to the average volatility persistency, the observed series for COVID-19’s full sample period are generally less volatile than those of the GFC. However, the sub-sample periods suggest that the observed series for both pre-crisis and during-crisis periods of COVID-19 are more volatile than those same sub-samples of the Global Financial Crisis. Being able to analyse the characteristics of stock market sectors is crucial for risk management and optimal portfolio allocation of stock market investments. This can be achieved through portfolio diversification by investing in a variety of stocks, both cyclical and defensive, and adjusted over time based the needs of stock market investors. Diversified portfolios do not only serve the interests of individual investors, but can also enhance the financial markets’ overall resistance against systemic risks. , Thesis (MCom) -- Faculty of Commerce, Economics and Economic History, 2022
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- Authors: Wang, Zixiao
- Date: 2022-04-06
- Subjects: Stock exchanges , Johannesburg Stock Exchange , Global Financial Crisis, 2008-2009 , COVID-19 (Disease) Economic aspects , Economic forecasting , Stock exchanges and current events , GARCH model
- Language: English
- Type: Academic theses , Master's theses , text
- Identifier: http://hdl.handle.net/10962/284603 , vital:56078
- Description: This research analyses the comparative behaviour of stock market volatility during two crises. The goal of this research is to determine whether assumed cyclical and defensive sectors have either retained or revealed their expected properties during both the Global Financial Crisis (GFC) and COVID-19 by analysing sectoral volatility amid these two crises. Understanding how volatility changes amid crises helps to determine whether the volatility assumptions of diversified investment portfolios for both defensive and cyclical sectors still held given the different causes of each crisis. In turn, this knowledge can assist with risk management and portfolio allocation in stock market investments. The study can also contribute towards the enhancement of financial markets’ resistance against systemic risks through portfolio diversification, and aid government decision-making targeted at tackling the weaknesses of different economic sectors especially in times of overall economic weakness. This research makes use of the GARCH model to analyse a group of daily time series that consists of eleven sectoral indices and one benchmark index, all based on the South African stock markets. These observed series are categorised into two full sample periods, one designated to the Global Financial Crisis (January 2006 to May 2009) and the other for COVID-19 (January 2018 to May 2021). These are further divided into two sets of sub-sample periods, each made up of a pre-crisis and during-crisis. Furthermore, the dummy variables representing the occurrence of structural breaks are inserted into the full sample periods’ conditional variance equations. This is aimed at capturing the asymmetrical impact of the crises themselves on all observed series. Based on the movement of volatility persistency from pre-crisis to during-crisis for both crises, the results show that, firstly, Health Care and Consumer Goods are considered defensive Sectors. Secondly, Banks, Basic Materials, Chemicals, Telecommunications, and Financials are considered cyclical Sectors. Thirdly, Automobiles & Parts, Consumer Services, and Technology are considered indeterminable Sectors due to the inconsistent behaviour of these sectors’ volatility persistency throughout the sub-sample periods of both crises. Overall, according to the average volatility persistency, the observed series for COVID-19’s full sample period are generally less volatile than those of the GFC. However, the sub-sample periods suggest that the observed series for both pre-crisis and during-crisis periods of COVID-19 are more volatile than those same sub-samples of the Global Financial Crisis. Being able to analyse the characteristics of stock market sectors is crucial for risk management and optimal portfolio allocation of stock market investments. This can be achieved through portfolio diversification by investing in a variety of stocks, both cyclical and defensive, and adjusted over time based the needs of stock market investors. Diversified portfolios do not only serve the interests of individual investors, but can also enhance the financial markets’ overall resistance against systemic risks. , Thesis (MCom) -- Faculty of Commerce, Economics and Economic History, 2022
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A comparative analysis of derivative regulation following the global financial crisis : an emerging markets perspective
- Authors: Mpala, Nqobile Natasha
- Date: 2015
- Subjects: Derivative securities , Global Financial Crisis, 2008-2009 , Capital market -- Developing countries , Derivative securities -- Developing countries , International economic relations
- Language: English
- Type: Thesis , Masters , MCom
- Identifier: vital:1121 , http://hdl.handle.net/10962/d1018660
- Description: The international financial environment has become riskier due to the recent developments in product offerings and failure of regulation to keep abreast with these changes. The Global Financial Crisis exposed inadequacies of regulation, thus consensus on the need for comprehensive and uniform regulation was made by G-20 member states. Imposing exchange trading, clearing, reporting and capital requirements on the derivatives market are some of the ways of dealing with the problems caused by lax regulatory oversight. In this study, through the comparative analysis of derivatives regulation in South Africa, Brazil, India and Turkey, it was established that emerging countries are taking active steps to implement the G-20 agreement. Uniformity in the core rules was noted, with differences in the supportive legislation. Country specific rules which support the macroeconomic factors that are faced by these countries and the infrastructure available for regulatory execution are used amongst countries. The study concluded that current regulation in emerging countries is accommodative and regulatory differences are in line with economic factors in each country.
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- Authors: Mpala, Nqobile Natasha
- Date: 2015
- Subjects: Derivative securities , Global Financial Crisis, 2008-2009 , Capital market -- Developing countries , Derivative securities -- Developing countries , International economic relations
- Language: English
- Type: Thesis , Masters , MCom
- Identifier: vital:1121 , http://hdl.handle.net/10962/d1018660
- Description: The international financial environment has become riskier due to the recent developments in product offerings and failure of regulation to keep abreast with these changes. The Global Financial Crisis exposed inadequacies of regulation, thus consensus on the need for comprehensive and uniform regulation was made by G-20 member states. Imposing exchange trading, clearing, reporting and capital requirements on the derivatives market are some of the ways of dealing with the problems caused by lax regulatory oversight. In this study, through the comparative analysis of derivatives regulation in South Africa, Brazil, India and Turkey, it was established that emerging countries are taking active steps to implement the G-20 agreement. Uniformity in the core rules was noted, with differences in the supportive legislation. Country specific rules which support the macroeconomic factors that are faced by these countries and the infrastructure available for regulatory execution are used amongst countries. The study concluded that current regulation in emerging countries is accommodative and regulatory differences are in line with economic factors in each country.
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An analysis of the risk adjusted returns of active versus passive South African general equity unit trusts during varying economic periods: an individual investor's perspective
- Authors: Ferreira, James Stuart
- Date: 2015
- Subjects: Mutual funds , Global Financial Crisis, 2008-2009 , Risk assessment , Financial crises -- South Africa , Portfolio management , Financial planners
- Language: English
- Type: Thesis , Masters , MCom
- Identifier: vital:1207 , http://hdl.handle.net/10962/d1019753
- Description: This thesis used the events of the 2007 financial crisis as a means of being able to add to the research already done on South African unit trusts. The objective was to study the risk-adjusted performance of South African general equity unit trusts against the market during the period between 2005 and 2014. This period took into account the bull market preceding the financial crisis, the market crash of 2007 and the subsequent market recovery that followed. Data was obtained online through the I-Net BFA data base and included 161 general equity unit trusts that contained a full data set. In addition to the general equity unit trusts, the Satrix40 was studied to compare a passive unit trust against those that are actively managed. The 10 year Government bond was also used as a risk-free rate to add to the comparisons of performance results. The Sharpe, Treynor and Jensen measures were applied to the data with the results adding more support to the opinions that markets are fairly efficient and active investment strategies are being challenged by consistently well performing passive investments. Throughout the duration of the study, taking into account the varying economic cycles, the Satrix40 passive investment showed the best average overall return on simple return calculations as well as during the risk-adjusted measurements. In support of active investment management, unit trusts showed their best relative performance figures during the period of the financial crisis. This suggested that active financial managers were able to make the active calls necessary to weather the storm of the financial crisis. While the study did have its limitations, the results it produced are intended to offer investors further knowledge in enabling them to make more educated investment decisions in the future.
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- Authors: Ferreira, James Stuart
- Date: 2015
- Subjects: Mutual funds , Global Financial Crisis, 2008-2009 , Risk assessment , Financial crises -- South Africa , Portfolio management , Financial planners
- Language: English
- Type: Thesis , Masters , MCom
- Identifier: vital:1207 , http://hdl.handle.net/10962/d1019753
- Description: This thesis used the events of the 2007 financial crisis as a means of being able to add to the research already done on South African unit trusts. The objective was to study the risk-adjusted performance of South African general equity unit trusts against the market during the period between 2005 and 2014. This period took into account the bull market preceding the financial crisis, the market crash of 2007 and the subsequent market recovery that followed. Data was obtained online through the I-Net BFA data base and included 161 general equity unit trusts that contained a full data set. In addition to the general equity unit trusts, the Satrix40 was studied to compare a passive unit trust against those that are actively managed. The 10 year Government bond was also used as a risk-free rate to add to the comparisons of performance results. The Sharpe, Treynor and Jensen measures were applied to the data with the results adding more support to the opinions that markets are fairly efficient and active investment strategies are being challenged by consistently well performing passive investments. Throughout the duration of the study, taking into account the varying economic cycles, the Satrix40 passive investment showed the best average overall return on simple return calculations as well as during the risk-adjusted measurements. In support of active investment management, unit trusts showed their best relative performance figures during the period of the financial crisis. This suggested that active financial managers were able to make the active calls necessary to weather the storm of the financial crisis. While the study did have its limitations, the results it produced are intended to offer investors further knowledge in enabling them to make more educated investment decisions in the future.
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Impact of the global financial crisis on economic growth: implications for South Africa and other developing economies
- Authors: Savy, Neil Edward
- Date: 2015
- Subjects: Global Financial Crisis, 2008-2009 , Gross domestic product -- Developing countries , Gross domestic product -- South Africa , Economic forecasting -- South Africa , Economic forecasting -- Developing countries , Economic development -- South Africa , Economic development -- Developing countries
- Language: English
- Type: Thesis , Masters , MCom
- Identifier: vital:1117 , http://hdl.handle.net/10962/d1017542
- Description: This paper examines the impact of the recent global financial crisis on economic growth in developing economies and South Africa in particular. It explores whether the events experienced by developing countries conform to what would be anticipated from economic theory. This is done by firstly comparing country growth forecasts for 2012 captured in 2008 at the beginning of the crisis to actual 2012 GDP growth data. Secondly, panel data analysis is used to investigate three important transmission channels, namely those of Trade, Capital Flows and Exchange Rates for 25 developing economies. The results suggest that economic forecasters in 2008 on average overestimated GDP growth for 2012 by -21.6 percent (excluding Venezuela). The only important transmission channel identified using Trend analysis to explain this negative impact on growth was capital flows. However when using Panel regression analysis all three channels were found to explain the economic impact of the crisis on GDP growth for developing countries, conforming to economic theory. It was discovered that, contrary to what was initially expected, portfolio inflows actually increased for most developing countries during the crisis. This possibly can be explained by the impact of quantitative easing in the USA. South Africa was found to have been negatively impacted by the global financial crisis, but to a lesser extent when compared to most other developing countries. The findings are important for global investors looking for new investment opportunities. The extent to which individual economies are “decoupled” from developed economies’ performance provides possible opportunities for diversifying risk through a geographic spread of investor portfolios.
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- Authors: Savy, Neil Edward
- Date: 2015
- Subjects: Global Financial Crisis, 2008-2009 , Gross domestic product -- Developing countries , Gross domestic product -- South Africa , Economic forecasting -- South Africa , Economic forecasting -- Developing countries , Economic development -- South Africa , Economic development -- Developing countries
- Language: English
- Type: Thesis , Masters , MCom
- Identifier: vital:1117 , http://hdl.handle.net/10962/d1017542
- Description: This paper examines the impact of the recent global financial crisis on economic growth in developing economies and South Africa in particular. It explores whether the events experienced by developing countries conform to what would be anticipated from economic theory. This is done by firstly comparing country growth forecasts for 2012 captured in 2008 at the beginning of the crisis to actual 2012 GDP growth data. Secondly, panel data analysis is used to investigate three important transmission channels, namely those of Trade, Capital Flows and Exchange Rates for 25 developing economies. The results suggest that economic forecasters in 2008 on average overestimated GDP growth for 2012 by -21.6 percent (excluding Venezuela). The only important transmission channel identified using Trend analysis to explain this negative impact on growth was capital flows. However when using Panel regression analysis all three channels were found to explain the economic impact of the crisis on GDP growth for developing countries, conforming to economic theory. It was discovered that, contrary to what was initially expected, portfolio inflows actually increased for most developing countries during the crisis. This possibly can be explained by the impact of quantitative easing in the USA. South Africa was found to have been negatively impacted by the global financial crisis, but to a lesser extent when compared to most other developing countries. The findings are important for global investors looking for new investment opportunities. The extent to which individual economies are “decoupled” from developed economies’ performance provides possible opportunities for diversifying risk through a geographic spread of investor portfolios.
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Recent developments in banking supervision and the soundness of the financial system : a comparative study of South Africa, Brazil and China
- Authors: Gutu, Taurai Fortune
- Date: 2015
- Subjects: Basel III (2010) , Bank management -- South Africa , Bank management -- Brazil , Bank management -- China , Global Financial Crisis, 2008-2009 , Ratio analysis , Liquidity (Economics)
- Language: English
- Type: Thesis , Masters , MCom
- Identifier: vital:1130 , http://hdl.handle.net/10962/d1020892
- Description: While the 2008 financial crisis has come and gone, its effects on the global financial sector still show. Globalisation has since changed the way that banks do business, and increased competitiveness and with it the level of risk within the international banking community. Therefore, because of these prolonged effects of the financial crisis and the rise in the level of risk in banking, regulators deemed it fit to make the global financial sector safer and sounder. As a result, the BASEL III Capital Accord was introduced with tighter capital adequacy and liquidity ratio requirements; as well as also introducing the leverage ratio. In this paper, through the study of the rules and regulations on banks in South Africa, Brazil and China, it was discovered that all three countries have since begun the implementation of the new Accord as from January 2013. While preparatory measures may be different, there is a general sense of regulatory alignment among the three countries. By analysing the capital adequacy, liquidity and leverage ratios of the three countries, it was also established that these ratios are interconnected, with the capital adequacy ratio being the most important one. The study concludes that, with proper implementation of these ratios and effective management, countries implementing the BASEL III regulations would be in a stronger position to achieve soundness in their banking systems. , Gutu, Taurai Fortunate
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- Authors: Gutu, Taurai Fortune
- Date: 2015
- Subjects: Basel III (2010) , Bank management -- South Africa , Bank management -- Brazil , Bank management -- China , Global Financial Crisis, 2008-2009 , Ratio analysis , Liquidity (Economics)
- Language: English
- Type: Thesis , Masters , MCom
- Identifier: vital:1130 , http://hdl.handle.net/10962/d1020892
- Description: While the 2008 financial crisis has come and gone, its effects on the global financial sector still show. Globalisation has since changed the way that banks do business, and increased competitiveness and with it the level of risk within the international banking community. Therefore, because of these prolonged effects of the financial crisis and the rise in the level of risk in banking, regulators deemed it fit to make the global financial sector safer and sounder. As a result, the BASEL III Capital Accord was introduced with tighter capital adequacy and liquidity ratio requirements; as well as also introducing the leverage ratio. In this paper, through the study of the rules and regulations on banks in South Africa, Brazil and China, it was discovered that all three countries have since begun the implementation of the new Accord as from January 2013. While preparatory measures may be different, there is a general sense of regulatory alignment among the three countries. By analysing the capital adequacy, liquidity and leverage ratios of the three countries, it was also established that these ratios are interconnected, with the capital adequacy ratio being the most important one. The study concludes that, with proper implementation of these ratios and effective management, countries implementing the BASEL III regulations would be in a stronger position to achieve soundness in their banking systems. , Gutu, Taurai Fortunate
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