Home

>

Risk-return tradeoff and the behaviour of volatility on the South African stock market: Evidence from both aggregate and disaggregate data

The study analyses the nature and behaviour of volatility, the risk-return relationship and the long-term trend of volatility on the South African equity markets, using aggregate-level, industrial-level and sectoral-level daily data for the period 1995-2009. By employing dummy variables for the Asian and the sub-prime financial crises and the 11 September political shock, the study further examines whether the long-term trend of volatility structurally breaks during financial crises and major political shocks. Three time-varying GARCH models were employed: one of them symmetric, and the other two asymmetric. Each of these models was estimated based on three error distributional assumptions. The findings of the study are as follows: Firstly, volatility is largely persistent and asymmetric. Secondly, risk at both the aggregate and disaggregate level is generally not a priced factor on the South African stock market. Thirdly, the TARCH-M model under the Generalised Error Distribution is the most appropriate model for conditional volatility of the South African stock market. Fourthly, volatility generally increases over time and its trend structurally breaks during financial crises and major global shocks. The policy and investment implications of the findings are outlined.

Working Paper 198
1 November 2010
RELATED JOURNAL:

South Journal of Economics 2012, 80(3): 345-366
SHARE THIS Working Paper PUBLICATION:
23 September 2012
Publication Type: Working Paper
JEL Code: C52, G10, G11, G12

Related South Africa’s Cities and Growth Spatial Challenges and Policy Interventions Content

Request for Proposals: The role of cities as drivers of growth and employment
Background Urbanization in South Africa is expected to reach 80% by...
Call for Work
South Africa’s future will be decided in our cities
Discussion Document 14 South Africa’s cities face multiple, overlap...
Dieter von Fintel, Justin Visagie, Ivan Turok, Takwanisa Machemedze, Claus Rabe, Sebastian Galiani, Edward Glaeser
Discussion Document
Monitoring South Africa’s metropolitan economies: A survey of the data landscape
Discussion Document 13 Disparities in data across different metropo...
Dieter von Fintel
Discussion Document
Cities, productivity and Jobs in SA: Problems and potential
Discussion Document 12 Cities contribute to national prosperity bec...
Ivan Turok, Justin Visagie
Discussion Document
Place-based economic policies: international lessons for South Africa
Discussion Document 11 Place-based policies are designed to support...
Harris Selod, Claus Rabe
Discussion Document
What luminosity data can and cannot reveal about South Africa’s urban economies
Discussion Document 10 As novel types of data are becoming availabl...
Takwanisa Machemedze
Discussion Document
Crime: A policy-oriented survey
Discussion Document 9 South Africa has a reputation for having high...
Sebastian Galiani
Discussion Document
Virtual CDE Workshop on SA Cities and Growth
Urban economics has provided powerful insights into how the charact...
Workshop

Search Resources

Ground Floor Brookside Building
11 Imam Haron Road
Claremont, 7700
Cape Town

PostNet Suite # 109
Private Bag X1005
Claremont 7735
Cape Town

Get Social