n African Finance Journal - Correlation surprise : the African and South African case
|Article Title||Correlation surprise : the African and South African case|
|© Publisher:||AfricaGrowth Institute|
|Journal||African Finance Journal|
|Affiliations||1 University of Cape Town and 2 University of Cape Town|
|Publication Date||Jan 2015|
|Pages||55 - 83|
This paper assesses the usefulness of monitoring market turbulence, return magnitude surprise and correlation surprise as potential signals to assist investors in timing de-risking strategies in the South African and African market settings. The analysis follows Kinlaw and Turkington (2014) who recently proposed the measures of magnitude and correlation surprise by decomposing the market turbulence measure. We find that in periods when correlation surprise spikes that in both the South African and African market environments subsequent periods are characterised by higher risk and lower returns. Our findings thus corroborate the predictive capability of the components of market turbulence.
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