Efficient market hypothesis : testing weak-form efficiency on the Johannesburg stock exchange
- Authors: Eaton, Bradley Hayes
- Date: 2020
- Subjects: Efficient market theory
- Language: English
- Type: Thesis , Masters , MCom
- Identifier: http://hdl.handle.net/10948/47895 , vital:40396
- Description: Understanding financial markets is paramount in acknowledging the flow of domestic and foreign funds over time. In this study, net market capitalisation price and simple return characteristics were investigated for the period from January 2009 to December 2017. An empirical, statistical approach was used to explore the possibility that, since the 2008 financial crisis, forward-looking, aggregate market and financial-oriented equity indices have conformed to the Efficient Market Hypothesis. Accordingly, monthly observations were made to ensure long-run traits were identified and scrutinised. Such revelations are important for portfolio diversification, risk, and expected return potentials with respect to South African equity markets. Based on the study, it was found that random walks were evident in both the price and return time-series as a result of significant stochastic price action, supported by evidence suggesting non-normality of price and return distributions. Unit root and stationarity modelling confirmed such traits. However, significant trending behaviours were evident in the auto-correlation figures with regards to prices, despite mean-reverting and stochastic influences. Therefore, it was concluded from the results of the study that the respective time-series were weak-form efficient. The empirical component was supplemented by a comprehensive investigation into the market determinants of financial market inefficiencies, including partial correlations, contagion effects, momentum, financial bubbles, and liquidity issues. Secondary objectives of the study included identifying the roles of security exchanges and the effect of international linkages, as a result of globalisation, on the financial markets. Increased macro-economic and systems integration has led to positive and negative connotations for business cycles. Spill-over effects into global equity markets are evident as can be seen through the co-integration of leading world exchanges, both in the developed and emerging market spheres. Fundamental to this study was the sensitivity of South African equity markets to recessionary pressures, as analysed through the efficiency of aggregated equity indices.
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- Date Issued: 2020
The impact of internal behavioural decision-making biases on South African collective investment scheme performance
- Authors: Muller, Stacey Leigh
- Date: 2015
- Subjects: Decision making , Investment analysis , Efficient market theory , Consumer behavior , Behavioral assessment , Mutual funds
- Language: English
- Type: Thesis , Masters , MCom
- Identifier: vital:1209 , http://hdl.handle.net/10962/d1020308
- Description: Market efficiency, based on people acting rationally, has been the dominating finance theory for most of the 20th and 21st Century’s. This classical finance theory is based on assumptions that people are rational, they absorb all available information and maximise utility. This view is outdated; it has been shown that people are in fact irrational and that this could be the cause of anomalies in the market. Behavioural finance takes into account people, and their natural biases. Behavioural finance has integrated classical financial theories and psychological theories to illustrate the way in which irrational people can impact market efficiency. This research looks at the way collective investment scheme manager decision-making can impact market efficiency. Specifically the behavioural biases: overconfidence, over optimism, loss aversion and frame dependence and whether or not collective investment scheme performance is affected by these. This research was carried out using a questionnaire distributed directly to CIS managers and risk-adjusted returns were used in order to allow for comparative results. The results from the questionnaire show evidence that actively managing South African CIS managers do indeed suffer from overconfidence and loss aversion and they do not appear to suffer from frame dependence or over optimism in this research context. There was also evidence showing that managers who suffer from these biases also demonstrated lower investment returns. “The investor’s chief problem, and even his worst enemy, is likely to be himself.” - Benjamin Graham
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- Date Issued: 2015