Portfolio Choice; Investment Decisions
This paper highlights the shortfalls of Modern Portfolio Theory (MPT). Amongst other flaws, MPT assumes that returns are normally distributed; that correlations are linear; and that risks are symmetrical. We propose a dynamic and flexible scenario-based approach to portfolio selection that incorporates an investor’s economic forecast.
This paper examines regional and global co-movemnt of Africa’s stock markets using the three-dimensional continuous Morlet wavelet transform methodology. The analyses which are done in segments investigate co-movements with global markets; bilateral exchange rates expressed in US dollars and euro; and four regional markets in Africa. First, we find evidence of stronger co-movements broadly narrowed to short-run fluctuations.
This paper examines the dependence structure between two developed and four emerging African stock markets in a copula framework. Using daily data from January 2000 to April 2014, our empirical results show that dependence structure between African and international stocks varies overtime, but generally weak. There is asymmetric and weak tail dependence for all the countries, implying stock return co-movement varies in bearish and bullish markets and that the dependence is generally not strong in extreme market conditions.
Owing to frequent fluctuations in global markets, diversifying across emerging markets is increasingly becoming a necessity. Despite this, a cloud of uncertainty surrounds the relative capacities of emerging markets to provide the required shields for international investors, especially during extreme market conditions. In this paper, we explore the relative potentials of African equities to provide opportunities for hedging and diversification for global commodity investors by using data of daily periodicity on close-to-close basis from January 3, 2003 to December 29, 2014.
Although the general assumption is that daily and monthly returns data are normally distributed (Aparicio & Estrada, 2001), the correct statistical distribution of returns must first be established (Linden, 2001), as it constitutes one of the elementary building blocks that will ensure accurate financial analyses (Taylor, 1986). The assumption of normality is also critical when constructing reference intervals for variables (Royston, 1991).
We combine new developments in decision theory with a standard consumption-based asset-pricing framework. In our model the efficient market hypothesis is violated if and only if agents beliefs' express ambiguity about the stochastic process driving economic fundamentals. Asset price fluctuations result because agents with ambiguous beliefs are prone to a con firmatory bias in the interpretation of new information. We demonstrate that our approach gives rise to price-patterns of "underreaction" and "overreaction" to news about dividend payments.
The restitution of land to the Khomani San "bushmen" and Mier "agricultural" communities in May 2002 marked a significant shift in conservation in the Kgalagadi area in South Africa. The Khomani San and Mier communities were awarded land inside and outside the Kgalagadi Transfrontier Park. Given that the Khomani San interact more with nature, biodiversity conservation will only benefit from the land restitution in this case if the Khomani San are good environmental stewards.
This paper studies volatility comovement in world equity markets between 1994 and 2008. Global volatility factors are extracted from a panel of monthly volatility proxies relating to 25 developed and 20 emerging stock markets. A dynamic factor model (FM) is estimated using two-year rolling window regressions. The FMs time-varying variance shares of global factors map variations in volatility comovement over time and across countries.
This paper investigates the macroeconomic determinants of stock market prices in Namibia. The investigation was conducted using a VECM econometric methodology and revealed that Namibian stock market prices are chiefly determined by economic activity, interest rates, inflation,money supply and exchange rates. An increase in economic activity and the money supply increases stock market prices, while increases in inflation and interest rates decrease stock prices.