Masters Degrees (Business Management)

Permanent URI for this collection

https://scholar.sun.ac.za/handle/10019.1/500

Browse

Browsing Masters Degrees (Business Management) by browse.metadata.advisor "De Villiers, J. U."

Now showing 1 - 4 of 4
  • Thumbnail Image
    Item
    An empirical investigation into cross-sectional return dispersion on the South African equity market
    (Stellenbosch : Stellenbosch University, 2013-12) Van Reenen, Reenen James; De Villiers, J. U.; Stellenbosch University. Faculty of Economic & Management Sciences. Dept. of Business Management.
    ENGLISH ABSTRACT: This study examines the role of cross-sectional return dispersion in portfolio management by examining two topics. To begin with, the study considers why return dispersion changes over time. Given the influence of return dispersion on active portfolio return opportunity, it is important for managers to understand why return dispersion changes over time. For a sample of South African listed shares over the period June 1996 to December 2011, univariate time-series analysis reveals significant serial correlation in return dispersion which may be modelled using ARMA (1, 1) and GARCH (1, 1) processes. Further analysis within a rational economic framework reveals that return dispersion is countercyclical to aggregate economic activity and related to both local and foreign economic uncertainty. The study then considers the relationship between return dispersion and the return to investment strategies. If substantial association between return dispersion and any investment strategy exists, then it is possible for managers and fund sponsors to augment an understanding of when active return opportunity is high with strategies for exploiting return opportunities. Continuing within the rational economic framework, the study uses Spearman‟s rank correlation coefficients to show a significant positive relationship between return dispersion and the value premium. In aggregate, these findings suggest that it is possible for South African investors to understand why return dispersion changes over time, as well as how to take advantage of changes in return dispersion.
  • Thumbnail Image
    Item
    The equity duration of South African growth companies : a theoretical and empirical evaluation
    (Stellenbosch : Stellenbosch University, 2002-12) Barnard, Ian; De Villiers, J. U.; Stellenbosch University. Faculty of Economic & Management Sciences . Dept. of Business Management.
    ENGLISH ABSTRACT: This assignment sets out to address the concept of equity duration, where equity duration is viewed as a measure of the interest rate sensitivity of common stock's market value. The traditional use of standard dividend discount models, results in extremely long duration estimates for equities - in the order of 10 years for income stocks to 25 years and more for growth companies whose cash flows are not expected to materialize until some future period. Leibowitz (1986) identified an alternative approach for assessing equity duration empirically. These empirical estimates of actual stock price sensitivity to underlying changes in interest rates imply that equities behave as if they are much shorter duration instruments. Various attempts have been made to reconcile the difference between theoretical predictions of equity duration and empirical findings. The differences in duration of assets in place and growth opportunities are given as a possible reason for the above mentioned differences. It is argued that investment opportunities are similar to options a company has. These option-like characteristics of growth opportunities may alter the basic relationship between equity valuation and interest rate changes. The option framework suggests that the duration of growth companies may be shorter (not longer) than those of assets in place. The results from option theory can however not be applied directly to growth options, since some of the assumptions may not be valid in the case of growth options. The presence of these growth options makes it virtually impossible to calculate equity duration theoretically. This study empirically tests the relationship between growth opportunities and equity duration by focussing the attention on the interest rate sensitivity of South African growth companies. The following hypotheses regarding equity duration and growth companies are postulated: • There is a significant difference in interest rate sensitivity between growth companies and low-growth companies. • There is a significant difference between duration of growth companies measured using nominal interest rates and duration of growth companies using real interest rates. All non-mining companies on the Johannesburg Securities Exchange SA, for the period 1980 to 2000, were analysed. These companies were sorted into different portfolios that reflected their growth opportunities. Market capitalisation, book-to-market and price-earnings ratios were used as proxies to rank companies according to growth opportunities. The results from univariate regressions suggest positive duration for common equities. The negative relationship between equity returns and changes in nominal interest rates are independent of size, book-to-market or price-earnings ratios of the sampled companies. Including the market factor as an independent variable results in markedly different equity duration. The duration is correlated with size, as both coefficients and t-statistics increase when moving from small companies to larger companies. In addition, the small companies have negative not positive duration, as was the case for simple univariate regressions. There is also some evidence that high growth portfolios, as measured by low book-to-market and high price-earnings ratios, are less sensitive to interest rate changes than low growth portfolios. Employing all three Fama and French's factors, there is no longer a cross-sectional dependence on company size, with the mean duration being close to zero and statistically insignificant in virtually all cases. Also, when dividing changes in the nominal interest rate into changes in real rates and changes in inflation, it does not significantly affect the estimates of equity duration. The author found no evidence to support the stated hypotheses, when employing the Fama and French's three factor model. This may mean that the relationships are subsumed in the Fama and French risk factors.
  • Thumbnail Image
    Item
    Offshore investments from a South African resident's perspective
    (Stellenbosch : Stellenbosch University, 2003-03) Grant, David Ronald; De Villiers, J. U.; Stellenbosch University. Faculty of Economic and Management Sciences. Dept. of Business Management.
    ENGLISH ABSTRACT: The offshore investment industry has shown tremendous growth (R92,7 billion invested in offshore unit trusts and mutual funds) since the Minister of Finance took the bold step (1 July 1997) availing South African (SA) residents the opportunity to invest offshore. Currently, SA residents, subject to certain criteria, are allowed to invest R750 000 offshore. The primary objective of this assignment is to provide a general overview of offshore investments from a SA resident's perspective. Foreign investment policies as they relate to local residents are reviewed. Investment maxims, truisms and theory are introduced to provide a theoretical framework to accommodate future chapters. The question regarding why South Africans should invest offshore is answered by firstly identifying specific risks that are unique to this country, its people and businesses and, secondly, by looking at market risk. Conclusive empirical evidence states that offshore diversification reduces portfolio risks and enhances returns. Offshore investments, their related costs/fees, investment strategies as well as regulations that offshore investors must adhere to, are also discussed. The most important obstacles to investing offshore, namely the home bias phenomenon and currency or exchange rate risk, are placed in perspective. Important tax implications for investing offshore are also briefly mentioned. In the final chapter conclusions and recommendations are made.
  • Thumbnail Image
    Item
    An overview of asset allocation processes and their importance in portfolio management
    (Stellenbosch : Stellenbosch University, 2001-04) Gantz, Frederick Albrecht; De Villiers, J. U.; Stellenbosch University. Faculty of Economic and Management Sciences. Dept. of Business Management.
    ENGLISH ABSTRACT: Rapid development of asset pricing models, asset return prediction models, information technologies, and the integration and globalisation of world economic markets, require the investor to have a fundamental understanding of the role of asset allocation (diversification) and the various strategies available in achieving investor's risk and return objectives. Assets are allocated across different asset classes in an attempt to optimise the combination of investment returns and investment risk. In this way your investment will not be subject to the volatility of anyone asset class alone. It is important to note that the movements of one class of assets (stocks, bonds or cash) may be somewhat offset by the non-correlated movement of a different class of assets. The intent of asset allocation is not necessarily to increase return as much as it is to fmd the accepted rate of return, while simultaneously reducing risk or maintaining it at a predefined level. This study explores the underlying theories concerning the relative importance of asset allocation in determining portfolio performance, and the three primary asset allocation strategies available. It also discusses relevant theory of how the predictability of asset returns and the investment horizon of a portfolio can have an impact on which asset allocation strategy to utilize in achieving the necessary risk and return objectives of the investor.