Investment Analysts Journal - Volume 2013, Issue 77, 2013
Volumes & issues
Volume 2013, Issue 77, 2013
Investment Analysts Society Award for the best article published annually in the Investment Analysts JournalSource: Investment Analysts Journal 2013 (2013)More Less
Source: Investment Analysts Journal 2013, pp 1 –16 (2013)More Less
Fama and French (1992), in a controversial paper at the time, noted strong associations between cross-sectional equity returns and so-called style variables including size, the price to earnings (P/E) ratio, gearing and the book to market (B/M) ratio. Other researchers have subsequently identified further priced effects relating to (inter-alia): dividends, momentum, cash-flow and a January effect. Many of these have been identified on the Johannesburg Stock Exchange (JSE), (see: Page & Palmer 1991, Page 1996), Plaistowe & Knight 1987, Fraser and Page 2000, van Rensburg 2001, Mutooni and Muller 2007 and Hoffman 2012).
We re-examine many of these styles using an improved methodology and data set. We find that portfolios constructed on the basis of univariate ranked style characteristics exhibit significant effects over the period 1985 to 2011. Most notably, we find significant and persistent excess returns in the following variables: momentum, earnings yield, dividend yield, price to book, cash-flow to price, liquidity, return on capital, return on equity and interest cover. Furthermore, we find no evidence of a size effect, except for fledgling companies.
Source: Investment Analysts Journal 2013, pp 17 –34 (2013)More Less
The post-earnings announcement drift anomaly has been widely researched and confirmed for several markets around the world. This paper investigates the relationship between the earnings surprise as reflected by the price change immediately after the earnings announcement and the subsequent price drift over the next 120 days, called the PEAD effect. Evidence obtained for JSE listed shares over the period from 1991 to 2010 indicates that the PEAD effect is present, that its magnitude is statistically significant and that it exists independently of the size, value and momentum effects. The results indicate that after the initial reaction to the announcement, it is not until about the 20th to 40th trading day after the announcement that the share price starts drifting in the same direction as the initial reaction. Contrary to previous research that confirmed the overreaction phenomenon on the JSE for the period 1975-1989 (Bhana, 1995), the market therefore seems not to over- or under-react to the earnings information, but to receive confirmation in the two months following the announcement that is in line with the announcement - in the case of a positive surprise this confirmation may be indicative of better future prospects and that the higher than expected earnings might persist.
Source: Investment Analysts Journal 2013, pp 35 –43 (2013)More Less
This study presents a behavioural explanation of the pre-holiday effect. For the period 1971 to 2011, we first find that the mean pre-holiday return in Taiwan's major stock market index is statistically significantly higher than the mean non-pre-holiday return. Second, the pre-holiday event offers a return that differs from that on non-pre-holidays in an economically significant manner. Third, the high return on pre-holidays is not attributable to risk, other calendar anomalies, nor macroeconomic factors. Finally, the pre-holiday effect is related to proxies for positive emotion among investors. We conclude that these findings are consistent with the positive emotion and the pre-holiday effect hypothesis.
Source: Investment Analysts Journal 2013, pp 45 –54 (2013)More Less
The objective of this study is to analyse the sources of performance in South African domestic equity unit trusts during the period 2002 to 2011. The study was based on Sharpe's (1992) study of the asset allocation of mutual funds in the United States (US). Five sectors were selected to determine returns due to sector allocation: large-cap resources stocks, large-cap industrial stocks, large-cap financial stocks, mid-cap stocks and small-cap stocks.
The study shows that a large part of active returns was due to sector allocation in the case of general and growth equity unit trusts. The contribution of stock selection was negative in most cases. However, in the case of value unit trusts the converse is true. It was also observed that sector allocations were modified frequently in the case of the top-performing unit trusts to capitalize on the relative performance of the different major sectors from time to time.
Source: Investment Analysts Journal 2013, pp 55 –67 (2013)More Less
We investigate multi-market price discovery using two year intraday data for Egyptian and Argentinean depository receipts and their underlying stock. The contribution of the local versus international exchange to price discovery is assessed using the Gonzalo and Granger's permanent-transitory common factor model. Whereas price discovery in the local market for Egyptian equities accounted for 75,8% of the price discovery in the DR, the result was mixed for the Argentinean equities, with an average of only 41,67% of DR prices determined in the local market. We find that size of the company, liquidity and trading volume explain the contribution of each market.
Firm heterogeneity, macroeconomic conditions and capital structure adjustment speeds : evidence from the JSESource: Investment Analysts Journal 2013, pp 69 –80 (2013)More Less
This paper examines the effects of firm heterogeneity and macroeconomic conditions on the adjustment speed towards the target level of capital structure. The DPF estimator is used to carry out the analysis for a panel of 191 non-financial firms listed on the JSE for the period 2000 to 2010. Consistent with prior studies, the pace of adjustment towards the optimal capital structure is a function of firm specific characteristics and macroeconomic conditions. There is evidence to suggest that firms target the total and long term leverage, and not the short term leverage ratio. Firm level characteristics are shown to have differing effects on the adjustments speeds, and macroeconomic conditions play a significant role in influencing variations in capital structure adjustment speeds.