Investment Analysts Journal - Volume 2003, Issue 58, 2003
Volumes & issues
Volume 2003, Issue 58, 2003
Source: Investment Analysts Journal 2003, pp 7 –16 (2003)More Less
This study investigates the role of beta in explaining stock returns on the JSE Securities Exchange (JSE) both within a univariate framework and in the context of the small size and low price-to-earnings effects. Using a technique similar to Fama and French (1992), simulated portfolios are constructed in each month from July 1990 to June 2000 by ranking stocks on their market capitalisation, price-to-earnings ratios and beta estimates. Examining the resulting time-series means of monthly returns on the portfolios formed in this manner, it is documented that the portfolios containing smaller stocks earn higher returns yet have lower betas. Lower betas are observed for portfolios containing low price-to-earnings stocks. However, they are also found to earn significantly higher average returns than their high price-to-earnings counterparts. It is, thus, inferred that the size and price-to-earnings effects are not proxies for the underlying influence of beta. When portfolios are formed based on beta in isolation, a mild negative relation is observed between beta and average returns. Using two-way sorts it is found that the size and price-earnings effects operate independently of each other. This supports the contention that at least two factors need to be specified in style-based model of expected returns on the JSE. The results of this study present a strong empirical challenge for covariance based models of asset pricing on the JSE.
Source: Investment Analysts Journal 2003, pp 17 –28 (2003)More Less
The results of a study of the performance of balanced portfolios in South Africa over the last 77 years are presented. Using the asset classes South African equities, bonds and cash, five portfolios of widely varying composition were formed. In addition two portfolios containing a portion of the equity allocation in the US market were created. Three rebalancing periods of a month, a quarter and a year and a strategy of rebalancing whenever the equity proportion of the portfolio moved more than five percentage points from its target were tested. <br>The compound annual returns of the portfolios were largely unaffected by the choice of rebalancing period. A small increase in portfolio standard deviation was found as the rebalancing period increased. In the absence of transactions costs it appears that an annual rebalancing strategy would have been the best choice. However annual rebalancing resulted in large deviations in the portfolio equity proportions during the rebalancing period, particularly for portfolios with low proportions of equity.
The share price reaction to announcements of key executive dismissals by companies listed on the JSE Securities ExchangeAuthor N. BhanaSource: Investment Analysts Journal 2003, pp 29 –40 (2003)More Less
This paper investigates the share price response to announcements of key executive dismissals by companies listed on the JSE Securities Exchange over the 25-year period 1975-1999. Announcements containing information about permanent replacements are associated with upward share price reactions. The evidence appears to be consistent with a market that is already aware of poor performance associated with management and regard the dismissal as good news and a sign that the problem may be remedied. It appears that shareholders are likely to perceive outsider appointments as immediately beneficial, but take a wait-and-see attitude towards insider appointments.
Source: Investment Analysts Journal 2003, pp 41 –50 (2003)More Less
Previous studies show that interest rates, dividend yields and other commonly available variables are useful market indicators. Although this has produced new insights into asset pricing models, it has not been applied to the measurement of South African unit trust funds' performance. This study introduces a set of predetermined variables into the measures of performance of South African unit trust fund managers. Following Ferson and Schadt (1996), classical performance measures are modified to incorporate market indicators. The performance and strategy of seven South African general equity unit trust managers are evaluated over the period 1989 to 2002. The predetermined variables are both statistically and economically significant. It is concluded that when the conditional measures are applied to this sample of unit trusts, their performance improves. No evidence of market timing strategy is demonstrated under a conditional approach.