G14

Information and Market Efficiency; Event Studies

Order flow and rand/dollar exchange rate dynamics

This paper uses the microstructure approach for the South African foreign exchange market to determine the impact of order flow on the rand/US dollar exchange rate over the short and long term. A hybrid model which combines microeconomic and macroeconomic fundamental determinants of the exchange
rate has been adopted. The analysis uses monthly series from January 2004 to December 2016. We find that order flow explains movements in the exchange rate, both in the short and in the long term. The speed of adjustment from short-term deviations is relatively slow.

The impact of Monetary Policy Announcements and Political Events on the Exchange Rate: The Case of South Africa

Since 2000 the South African rand has been among the most volatile emerging market currencies, occasionally experiencing sharp depreciations. These sharp fluctuations in the value of the currency cannot be adequately explained by models of flow-supply and flow-demand of currency or by movements in fundamental factors, yet few studies have employed an asset pricing approach to explain exchange rate variability in emerging markets.

Do monetary policy announcements affect foreign exchange returns and volatility? Some evidence from high-frequency intra-day South African data.

This paper examines the temporal effect of domestic monetary policy surprises on both the levels and volatility of the South African rand/United States dollar exchange rate. The analysis in this ‘event study’ proceeds using intra-day minute-by-minute exchange rate data, repo rate data from the South African Reserve Bank’s scheduled monetary policy announcements, and Bloomberg market consensus repo rate forecasts.

Qualitative Guidance and Predictability of Monetary Policy in South Africa

With the adoption of the in‡ation targeting (IT) regime in 2000, the South African Reserve Bank (SARB) became independent. With the independence of monetary policy comes accountability to the public at large, which in turn leads to transparency in the conduct of monetary policy. The SARB has come a long way in its communication strategy.

Timing a Hedge Decision: The Development of a Composite Technical Indicator for White Maize

South African white maize is considered to be significantly more volatile than any other agricultural product traded on the South African Futures Exchange (SAFEX). This accentuates the need to effectively manage price risk, by means of hedging, to ensure a more profitable and sustainable maize production sector (Geyser, 2013: 39; Jordaan et al., 2007: 320).

Bank Deposit Contracts Versus Financial Market Participation in Emerging Economies

The financial sector of emerging economies in Africa is characterized by a non-competitive banking sector which dominates any direct participation of agents in asset markets. Based on a variant of Diamond and Dybvig's (1983) model of financial inter-mediation, we formally explain both stylized facts through market inexperience”of agents in emerging economies. While experienced agents correctly predict future mar- ket clearing equilibrium prices, inexperienced agents are ignorant about future market equilibria.

Macroeconomic uncertainty and emerging market stock market volatility: The case for South Africa

This paper analyses how systematic risk emanating from the macro-economy is transmitted into stock market volatility using augmented autoregressive GARCH (AR-GARCH) and Vector autoregression models. Also examined is whether the relationship between the two is bidirectional. By imposing dummies for the 1997-98 Asian and the 2007-2008 sub-prime financial crises, the study further analyses whether financial crises affect the relationship between macroeconomic uncertainty and stock market volatility.

Value, Size and Momentum Portfolios in Real Time: The Cross-Section of South African Stocks

We implement a recursive out-of-sample method to examine anomalies-based ex-ante predictability in the cross-section of stock returns. We obtain a series of simulated out-of-sample returns, consistent with investors using only prior information when choosing predictor variables. We find that, by commonly used performance criteria, real-time trading strategies based on size, value and momentum effects would not consistently outperform a passive index of South African stocks - despite consistent in-sample excess returns.

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