- Title
- Analysis of the relationship between changes in macroeconomic variables and various sector price indices of JSE
- Creator
- Mapanda, Tungamirai Chisvuvo
- ThesisAdvisor
- Keeton, Gavin Rodney
- ThesisAdvisor
- Khumalo, Alwyn
- Subject
- Johannesburg Stock Exchange
- Subject
- Stock price indexes -- South Africa
- Subject
- Interest rates -- South Africa
- Date
- 2020
- Type
- text
- Type
- Thesis
- Type
- Masters
- Type
- MCom
- Identifier
- http://hdl.handle.net/10962/147445
- Identifier
- vital:38637
- Description
- Purpose- The purpose of this paper is to analyse the relationship between changes in domestic macroeconomic variables and various indices of the JSE during the full time period, June 1995 to December 2018 and the sub-periods, June 1995 to June 2007 and July 2007 to December 2018. Design/ methodology/ approach- The paper employs the Autoregressive Distributed Lag (ARDL) model approach to cointegration using monthly data from June 1995 to December 2018. Findings- In terms of the long run, the results show that the coincident indicator measure of domestic economic activity is positively and significantly related to the various JSE indices for all study periods. In terms of inflation, the results show no relationship between inflation rate and the various indices for both whole period and June 1995 to June 2007 sub period. However for the July 2007 to December 2018 sub period, JSE All Share Index and JSE Top 40 Index are negatively related. For the real effective exchange rate, only the Consumer Services Index is positively related to the exchange rate in terms of June 1995 to June 2007 sub period. However, JSE All Share Index and JSE Top 40 Index are negatively related to the exchange rate in all study periods. In terms of the short term interest rate, for the whole period, JSE All Share Index, JSE Top 40 Index, Health Care Index and Telecommunications Index are negatively related to interest rate. In terms of the June 1995 to June 2007 sub period, JSE All Share Index and Industrials Index are negatively related to the short term interest rate. For the July 2007 to December 2018 sub period, Telecommunications Index and Technology Index are negatively related. In terms of the short run, the coincident indicator is positively and significantly related to the various JSE indices for all study periods. Inflation is not significantly related to any index in the whole period. In terms of the June 1995 to June 2007 sub period, Industrials Index and Financials Index are positively related to inflation and in the July 2007 to December 2018 sub period, Consumer Goods Index, Health Index and Consumer Services Index are negatively related to the inflation rate. The real effective exchange rate is positively and significantly related to the various JSE indices in the different study periods. In terms of the short term interest rate, for the whole period and the June 1995 to June 2007 sub period only the Technology Index is not significantly and negatively related to the short term interest rate, but for the July 2007 to December 2018 sub period, Top 40 Index, Telecommunications Index and Technology Index are positively related to the interest rate. Only the Financial Index is negatively related to short term interest rates during this sub period. Research Limitations- Not a lot literature was found on the relationship between macroeconomic variables and the various sector indices of the JSE. Most previous work, in the South African context focused just on the JSE All Share Index. Practical Implications- The findings can help investors diversify their portfolios into indices that benefit from expected changes in macroeconomic variables, such as recessions, rising interest rates, rising inflation or a weakening exchange rate. Alternatively, they can hedge themselves against the negative implications of such macroeconomic changes on portfolio performance. In addition, the findings are important for the monetary authorities to better understand the implications of their policy changes on financial markets.
- Format
- 166 pages, pdf
- Publisher
- Rhodes University, Faculty of Commerce, Economics and Economic History
- Language
- English
- Rights
- Mapanda, Tungamirai Chisvuvo
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| Thumbnail | File | Description | Size | Format | |||
|---|---|---|---|---|---|---|---|
| View Details Download | SOURCE1 | MAPANDA-MCOM-TR20-358.pdf | 2 MB | Adobe Acrobat PDF | View Details Download |