Dynamic returns linkages and volatility transmission between South African and world major stock markets
- Chinzara, Zivanemoyo, Aziakpono, Meshach J
- Authors: Chinzara, Zivanemoyo , Aziakpono, Meshach J
- Date: 2009
- Subjects: To be catalogued
- Language: English
- Type: text , article
- Identifier: http://hdl.handle.net/10962/469698 , vital:77279 , https://hdl.handle.net/10520/EJC21489
- Description: This paper analyses returns and volatility linkages between the South African (SA) equity market and the world major equity markets using daily data for the period 1995-2007. Also analysed is the nature of volatility, the long term trend of volatility and the risk premium hypothesis. The univariate GARCH and multivariate Vector Autoregressive models are used. Results show that both returns and volatility linkages exist between the SA and the major world stock markets, with Australia, China and the US showing most influence on SA returns and volatility. Volatility was found to be inherently asymmetric but reasonably stable over time in all the stock markets studied, and no significant evidence was found in support for the risk premium hypothesis.
- Full Text:
- Date Issued: 2009
- Authors: Chinzara, Zivanemoyo , Aziakpono, Meshach J
- Date: 2009
- Subjects: To be catalogued
- Language: English
- Type: text , article
- Identifier: http://hdl.handle.net/10962/469698 , vital:77279 , https://hdl.handle.net/10520/EJC21489
- Description: This paper analyses returns and volatility linkages between the South African (SA) equity market and the world major equity markets using daily data for the period 1995-2007. Also analysed is the nature of volatility, the long term trend of volatility and the risk premium hypothesis. The univariate GARCH and multivariate Vector Autoregressive models are used. Results show that both returns and volatility linkages exist between the SA and the major world stock markets, with Australia, China and the US showing most influence on SA returns and volatility. Volatility was found to be inherently asymmetric but reasonably stable over time in all the stock markets studied, and no significant evidence was found in support for the risk premium hypothesis.
- Full Text:
- Date Issued: 2009
Integration of the South African equity market into the world major stock markets: implication for portfolio diversification
- Chinzara, Zivanemoyo, Aziakpono, Meshach J
- Authors: Chinzara, Zivanemoyo , Aziakpono, Meshach J
- Date: 2009
- Subjects: To be catalogued
- Language: English
- Type: text , article
- Identifier: http://hdl.handle.net/10962/469889 , vital:77305 , https://hdl.handle.net/10520/EJC33719
- Description: The paper investigates whether there are any benefits from international equity diversification for South African long term investors using daily stock market indices for seven world stock markets for the period 1995-2008. Firstly, pairwise portfolios are tested for long-run comovement using the bivariate cointegration approach. Wider portfolios are then tested for long-run comovement using the multivariate cointegration based on the Johansen and Juselius (1992) approach. While no bivariate cointegration exists between the South Africa and each of the selected world major equity markets for the entire 1995-2008, cointegration exist with US if a dummy is included. Multivariate cointegration analysis suggests that long-run comovement exists for some of the wider portfolios with most of long-run coefficients being negative. Overall, our findings show that integration of SA to the major world markets is weak suggesting that international portfolio diversification is potentially worthwhile for South African investors.
- Full Text:
- Date Issued: 2009
- Authors: Chinzara, Zivanemoyo , Aziakpono, Meshach J
- Date: 2009
- Subjects: To be catalogued
- Language: English
- Type: text , article
- Identifier: http://hdl.handle.net/10962/469889 , vital:77305 , https://hdl.handle.net/10520/EJC33719
- Description: The paper investigates whether there are any benefits from international equity diversification for South African long term investors using daily stock market indices for seven world stock markets for the period 1995-2008. Firstly, pairwise portfolios are tested for long-run comovement using the bivariate cointegration approach. Wider portfolios are then tested for long-run comovement using the multivariate cointegration based on the Johansen and Juselius (1992) approach. While no bivariate cointegration exists between the South Africa and each of the selected world major equity markets for the entire 1995-2008, cointegration exist with US if a dummy is included. Multivariate cointegration analysis suggests that long-run comovement exists for some of the wider portfolios with most of long-run coefficients being negative. Overall, our findings show that integration of SA to the major world markets is weak suggesting that international portfolio diversification is potentially worthwhile for South African investors.
- Full Text:
- Date Issued: 2009
An empirical analysis of the long-run comovement, dynamic returns linkages and volatility transmission between the world major and the South African stock markets
- Authors: Chinzara, Zivanemoyo
- Date: 2008
- Subjects: Stock exchanges -- South Africa , Globalization -- Economic aspects -- South Africa , International economic relations , Portfolio management -- South Africa , Monetary policy -- South Africa
- Language: English
- Type: Thesis , Masters , MCom
- Identifier: vital:970 , http://hdl.handle.net/10962/d1002704 , Stock exchanges -- South Africa , Globalization -- Economic aspects -- South Africa , International economic relations , Portfolio management -- South Africa , Monetary policy -- South Africa
- Description: The international linkages of stock markets have important implications for cost of capital and portfolio diversification. Recent trends in globalization, financial liberalization and financial innovation raises questions with regard to whether African stock markets are being integrated into world equity markets. This study examines the extent to which the South African (SA) equity market is integrated into the world equity markets using daily data for the period 1995-2007. The study is divided into three main parts, each looking at the different ways in which integration can be considered. The first investigates whether there is long run comovement between the SA and the major global equity markets. Both bivariate and multivariate Johansen (1988) and Johansen and Juselius (1990) cointegration approaches were utilised. Vector Error Correction Models (VECMs) are then estimated for portfolios which show evidence of cointegration. The second part analyses returns linkages using the Vector Autoregressive (VAR), block exogeneity, impulse response and variance decomposition. The third part examines the behaviour of volatility and volatility linkages among the stock markets. Firstly volatility is analysed using the GARCH, EGARCH and GJR GARCH. Simultaneously, the hypothesis that investors receive a premium for investing in more risky stock markets is explored using the GARCH-in mean. The long term trend of volatility is also examined. Volatility linkages are then analysed using the VAR, block exogeneity, impulse response and variance decomposition. The first part established that no bivariate cointegration exists between the SA and any of the stock markets being studied, implying that pairwise portfolio diversification is potentially worthwhile for SA portfolio managers. However, multivariate cointegration exists for some portfolios, with the US, UK, Germany and SA showing evidence of error correction for some of these portfolios. Findings on return linkages is that there are significant returns linkages among the markets, with the US and SA being the most exogenous and most endogenous respectively. Findings regarding volatility are that the volatility in all the markets is inherently asymmetric and that except for the US there is no risk premium in any of the markets. The long term trend of volatility in all the stock markets was found to be relatively stable. The final finding was that significant volatility linkages exist among the markets, with the US being the most exogenous and SA and China showing evidence of bidirectional linkages. Overall, except for volatility linkages, the integration of SA into the global equity markets is still quite low. Thus, both SA and international investors can capitalise on this portfolio diversification potential. On the other hand, policy makers should capitalise on this and make policies that will attract the much needed foreign investors.
- Full Text:
- Date Issued: 2008
- Authors: Chinzara, Zivanemoyo
- Date: 2008
- Subjects: Stock exchanges -- South Africa , Globalization -- Economic aspects -- South Africa , International economic relations , Portfolio management -- South Africa , Monetary policy -- South Africa
- Language: English
- Type: Thesis , Masters , MCom
- Identifier: vital:970 , http://hdl.handle.net/10962/d1002704 , Stock exchanges -- South Africa , Globalization -- Economic aspects -- South Africa , International economic relations , Portfolio management -- South Africa , Monetary policy -- South Africa
- Description: The international linkages of stock markets have important implications for cost of capital and portfolio diversification. Recent trends in globalization, financial liberalization and financial innovation raises questions with regard to whether African stock markets are being integrated into world equity markets. This study examines the extent to which the South African (SA) equity market is integrated into the world equity markets using daily data for the period 1995-2007. The study is divided into three main parts, each looking at the different ways in which integration can be considered. The first investigates whether there is long run comovement between the SA and the major global equity markets. Both bivariate and multivariate Johansen (1988) and Johansen and Juselius (1990) cointegration approaches were utilised. Vector Error Correction Models (VECMs) are then estimated for portfolios which show evidence of cointegration. The second part analyses returns linkages using the Vector Autoregressive (VAR), block exogeneity, impulse response and variance decomposition. The third part examines the behaviour of volatility and volatility linkages among the stock markets. Firstly volatility is analysed using the GARCH, EGARCH and GJR GARCH. Simultaneously, the hypothesis that investors receive a premium for investing in more risky stock markets is explored using the GARCH-in mean. The long term trend of volatility is also examined. Volatility linkages are then analysed using the VAR, block exogeneity, impulse response and variance decomposition. The first part established that no bivariate cointegration exists between the SA and any of the stock markets being studied, implying that pairwise portfolio diversification is potentially worthwhile for SA portfolio managers. However, multivariate cointegration exists for some portfolios, with the US, UK, Germany and SA showing evidence of error correction for some of these portfolios. Findings on return linkages is that there are significant returns linkages among the markets, with the US and SA being the most exogenous and most endogenous respectively. Findings regarding volatility are that the volatility in all the markets is inherently asymmetric and that except for the US there is no risk premium in any of the markets. The long term trend of volatility in all the stock markets was found to be relatively stable. The final finding was that significant volatility linkages exist among the markets, with the US being the most exogenous and SA and China showing evidence of bidirectional linkages. Overall, except for volatility linkages, the integration of SA into the global equity markets is still quite low. Thus, both SA and international investors can capitalise on this portfolio diversification potential. On the other hand, policy makers should capitalise on this and make policies that will attract the much needed foreign investors.
- Full Text:
- Date Issued: 2008
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