1,721,043 research outputs found
An analysis of the Unbiased Forward Rate Hypothesis (UFRH) in developed and emerging economies
Get PDFAbstract : This paper tests the unbiased forward rate hypothesis (UFRH) in selected developed and emerging economies within the context of nonlinear models. Moreover, the paper assesses the extent of the nonlinear adjustment towards equilibrium between the spot and forward exchange rates in these economies. Using the smooth transition error correction model (STECM) to account for long-run relationship and asymmetric adjustment between the spot and forward prices, the results of the empirical analysis reveal that there is nonlinear adjustment between the spot and forward exchange rates in developed and emerging economies. In addition, the results show that the magnitude of the speed of adjustment to mitigate arbitrage opportunities triggered by the deviation between the spot and forward prices is higher in emerging than in developed markets. This occurs because the size of arbitrage profit is higher in emerging markets compared to developed markets.M.Com. (Financial Economics
Estimation of value-at-risk in BRICS economies : use of multivariate GARCH models
Get PDFAbstract: A substantial amount of studies have estimated market risk by employing multivariate GARCH models but none of these studies according to be best of our knowledge has applied this technique on BRICS data . The aim of this paper is to compare the performance of three multivariate risk models (DCC-GARCH, ADCC-GARCH and CCC-GARCH) in estimating portfolio Value-at-Risk (VaR). Unlike the previous literature, we employ in our study the BRICS data and different weights to assess how changes in these weights affect the performance of the different multivariate risk models. The equity market indexes from the five countries that the paper employs are; the Brazilian Ibovespa Brasil Sao Paulo Stock Exchange Index (IBOV), Russian MICEX index, Indian S&P BSE SENSEX Index (SENSEX), Chinese Shanghai Stock Exchange Composite Index (SHCOMP) and the South African Johannesburg All Share Index (ALSI). In addition the Brazilian real/USD (brl/usd), Russian ruble/usd, Indian rupee/USD (inr/usd), renminbi/USD (cyn/usd) and the rand/USD (zar/usd) exchange rates are also employed in the study. The Average Deviations, Quadratic Probability Function Score and the Root Mean Square Error are used to backtest the performance of the models at 90%. The results indicate that multivariate GARCH models of dynamic correlation, in particular the DCC and ADCC-GARCH perform better than the CCC. In addition, giving more weight to currencies and less to equities proves to be the best way of minimizing risk in BRICS when holding a portfolio made of foreign exchanges and equities.M.Com
Rethinking the current inflation target range in South Africa
No full textAbstract: Please refer to full text to view abstractM.Com. (Economics
Assessing shock spillover, business cycle synchronisation and the impact of global imbalances on African countries
No full textAbstract: The empirical investigations in this thesis are relevant, timely and deal with contemporary regional and global developments that influence policy setting in Africa but have received less empirical attention. The thesis makes significant contributions by focusing on less researched areas in the extant areas, specifically, the emergence of an ‘African’ (or regional) business cycle as regional integrations deepen with the creation of large FTAs; the transmission of intra-regional spillover analysis; and the implications of external adjustments for global imbalances in large systematically important economies (in this case, the US and China) on African countries. It also extends the empirical literature by employing different novel large macro-econometric models to remedy the limitations in the previous studies and yield more robust evidence. The empirical researches in the thesis are also useful in the policymaking settings at the country, regional and global levels...Ph.D. (Economics
The impact of oil and gold price fluctuations on the South African equity market : volatility spillovers and implications for portfolio management
Get PDFM.Com. (Financial Economics)Abstract: This paper aims to study the impact of gold and oil price fluctuations on the volatility of the South African stock market and its component indices or sectors – namely, the financial, industrial and resource sectors – making use of the asymmetric dynamic conditional correlation (ADCC) generalised autoregressive conditional heteroskedasticity (GARCH) model. Moreover, the study assesses the magnitude of the optimal portfolio weight, hedge ratio and hedge effectiveness for portfolios that are constituted of a pair of assets, namely oil-stock and gold-stock pairs. The findings of the study show that there is significant volatility spillover between the gold and the stock markets, and the oil and stock markets. This finding suggests the importance of the link between futures commodity markets and the stock markets, which is essential for portfolio management. Moreover, the results on the dynamic correlation between the two pairs of markets show high variation in their correlations over time, varying between positive and negative values. This finding indicates an opportunity for meaningful portfolio diversification during periods of negative correlation. With reference to portfolio optimisation and the possibility of hedging when using the pairs of assets under study, the findings suggest the importance of combining oil and stocks as well as gold and stocks for effective hedging against any risks
Assessing the effectiveness of the monetary policy instrument during the inflation targeting period in South Africa
Get PDFAbstract: This paper assesses how inflation react to monetary policy shocks in South Africa during the inflation targeting period by making use of the structural vector error correction model (SVECM). The results of the impulse response function obtained from the SVECM show that, on average, contractionary monetary policy that intends to curb inflationary pressure has been impotent in South Africa. However, the contractionary monetary policy shocks managed to reduce output. The paper suggests that it is time a dual target, inflation and output, be considered in South Africa to avoid the harm caused on output growth from monetary policy actions related to the constraint of inflation targeting
Fiscal policy, Monetary policy and External imbalances: Cross-country evidence from Africa’s three largest economies (Nigeria, South Africa and Egypt)
Get PDFThis paper assesses which of the policy between fiscal, monetary and exchange rate policies can redress external imbalances in the three largest African countries, namely Nigeria, South Africa and Egypt. To this end, use is made of the panel vector autoregressive (PVAR) model to assess the dynamic effects of fiscal, monetary and exchange rate shocks mainly on the current account balances. The findings of the paper indicate that contrary to many emerging and developed economies the current account reacts to fiscal, monetary and exchange rate shocks in the three largest economies in Africa. More particular, the results of the empirical analysis show that the appreciation of the currency in the three economies lead to current account surplus. This is mainly attributed to the fact that most African economies have a high propensity to import with limited productive capacity for exports
Essays on public infrastructure investment in South Africa
Get PDFAbstract: This thesis is a collection of four essays assessing the impact of public infrastructure investment in South Africa. Each of the four essays, Chapter 2 to Chapter 5, can be considered as standalone self-contained pieces of work. The thesis general introduction and conclusion are given in Chapter 1 and Chapter 6 respectively. The first essay (Chapter 2) focused on growth and employment impacts of increasing public infrastructure investment in South Africa, using dynamic computable general equilibrium (CGE) modelling. The results of all simulations showed that an increase in public economic infrastructure investment had positive impacts on economic growth and employment in South African. However, the results indicate that relatively better outcomes are observed when investment in public infrastructure is financed through a combination of tax and government deficit, particularly in the short run and long run. The second essay (Chapter 3) applied multiplier analysis, structural path analysis (SPA) and CGE modelling to analyse the linkages between the public economic sector and other economic actors following an increase in public economic infrastructure in South Africa. Multiplier analysis indicates that the public economic sector is a significant sector in the South African economy and that it has the strongest backward linkages. This means a shock to this sector, in the form of an increase in public economic infrastructure investment, has a positive economy-wide effect. The public economic sector, as indicated by SPA, impacts on the economy mainly via the formal labour categories. The static CGE analysis results show that an increase in public economic infrastructure investment has an overall positive impact on the South African economy. CGE modelling results and SAM modelling results confirm that increasing public economic infrastructure could help reduce unemployment in South Africa. The third essay (Chapter 4) applies CGE-microsimulation to investigate the economy-wide and poverty and inequality impacts of an increase in the price of electricity in South Africa. The results indicate that an increase in the price of electricity that results in an increase in output production for the electricity sector and other sectors through supply side effects does not have an entirely negative impact on the economy. Even though inequality does not decline, this provides some relief in terms of poverty. The fourth essay (Chapter 5) investigated the existence of a nonlinear relationship between capital spending and capital transfers for South African municipalities using the panel smooth transition regression (PSTR) model. The essay analysed factors that contribute to underspending of the capital budget by South Africa municipalities. The results confirm the existence of a nonlinear relationship between municipal government capital spending and capital transfers in South Africa. The results indicate that large amounts of capital transfer are too high for the capacity of some municipalities, which explains persistent underspending of the capital budget.Ph.D. (Economics
Prediction of stock market returns and direction : application of machine learning models
Get PDFAbstract: Prediction of market direction has gained more attention than the prediction of point returns over the past few years. Market direction prediction is essential in determining buy and sell investment strategies. A correct forecast of the market trend will lead investors to make knowledgeable decisions about their future investments. This study seeks to predict the market direction of two developed markets (USA and UK) and two emerging markets (SA and Brazil) using five machine learning techniques, namely support vector machines (SVM), decision trees (DTs), random forest (RF), k-nearest neighbours (K-NN) and linear discriminant analysis (LDA), which is considered as the benchmark model. The choice of the four stock markets is due to developed and emerging markets suffering from structural breaks in different ways. Emerging markets are more volatile and are prone to suffer from more structural breaks than developed markets. Therefore, the aim of this study is to compare the performance and ability of the above-mentioned machine learning techniques to predict in both an environment with more structural breaks and one with less structural breaks. The main objective is hence to find out which one of these techniques performs better in consistently predicting stock market directions. The techniques’ performances are measured and evaluated using matrices such as the confusion matrix, receiver operating characteristic (ROC), accuracy tests, precision, balanced accuracy and F1 score. To avoid the effect of bias, we split the entire data set into 10 folds and use the crossvalidation method with bootstrapping technique. Using daily stock prices of the S&P 500, FTSE 100, All Share Index (ALSI) and Bovespa, a representation of the respective stock market indices of the abovementioned countries was obtained, as well as their respective price earnings (PE) ratios and dividend yields from 03 July 1995 to 28 August 2018. Our empirical results show that the S&P 500, FTSE 100 and ALSI market directions are primarily driven by their previous day stock returns and dividend yields. The Bovespa market direction, on the other hand, is more driven by its previous day return as well as its PE ratio. Using the confusion matrix, we find that the RF and DTs are the best models in predicting the market direction of S&P 500, FTSE 100 and ALSI, followed by K-NN, SVM and LDA. K-NN and DT failed to predict the upward trend of the Brazilian stock market index.M.Com. (Financial Economics
Assessing the readiness of BRICS grouping for mutually beneficial financial integration
Get PDFThis paper assesses the extent of the transmission of equity market volatility shocks between BRICS (Brazil, Russia, India, China and South Africa) countries to infer the degree of risk sharing and the possibility of a beneficial financial integration between its member countries. The paper makes use of the spillover index methodology suggested by Diebold and Yilmaz (2012) to this end. Nonetheless, the paper extends this methodology by making use of ex ante volatility measures that account for long memory in equity markets. The paper finds asymmetric influences between BRICS countries in relation to the cross transmission of risks. The finding of the paper implies the possibility of unequal benefit that could result from a possible capital market liberalisation between the BRICS countries
- …
