Browsing by Author "Obalade, Adefemi Alamu."

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Adaptive market hypothesis and calendar anomalies in selected African stock markets.
(2019) Obalade, Adefemi Alamu.; Muzindutsi, Paul-Francois.
It takes a theory to beat a theory. However, whether the adaptive market hypothesis (AMH) offers better explanations for stock return behaviour than the popular efficient market hypothesis (EMH) still remains a question for serious empirical investigation. This question informed the analyses of efficiency and calendar anomalies in the selected African stock market, namely the Nigerian Stock Exchange (NGSE), the Johannesburg Stock Exchange (JSE), the Stock Exchange of Mauritians (SEM), the Casablancan Stock Exchange (MOSE) and the Tunisian Stock Exchange (TSE) with the sample period spanning from January 1998 to February 2018. The first objective of this study is to investigate whether market efficiency changes in cyclical version over time, according to the AMH. The second objective is to evaluate the effect of market conditions (up, down, bull, bear, normal) on return predictability. The third objective is to analyse whether calendar anomalies disappear and reappear over time. The fourth objective is to determine how the anomalies behave under different bull and bear market conditions. Various linear testing tools such as the variance ratio test, the autocorrelation test, the unit root tests and the nonlinear of BDS were implemented in rolling window approach to track time-variation in efficiency. A dummy regression model was used to evaluate the market condition effect on return predictability. This study also explored rolling window analyses of several alternative variants of nonlinear models of the GARCH family, to track variation in the behaviour of days-of-the-week (DOW), months-of-the-year (MOY) and intra-month effects. Lastly, the study modelled the switching behaviour of the calendar anomalies under bull and bear conditions by using the Markov switching model (MSM), which is able to generate regime-specific regression results for the calendar anomalies under consideration. Findings from the various linear and nonlinear tests revealed that there are cycles of significant linear and nonlinear dependence and independence in each of the five markets, suggesting bouts of predictability and unpredictability. The regression analyses of return predictability against series of market condition dummies revealed that highIt takes a theory to beat a theory. However, whether the adaptive market hypothesis (AMH) offers better explanations for stock return behaviour than the popular efficient market hypothesis (EMH) still remains a question for serious empirical investigation. This question informed the analyses of efficiency and calendar anomalies in the selected African stock market, namely the Nigerian Stock Exchange (NGSE), the Johannesburg Stock Exchange (JSE), the Stock Exchange of Mauritians (SEM), the Casablancan Stock Exchange (MOSE) and the Tunisian Stock Exchange (TSE) with the sample period spanning from January 1998 to February 2018. The first objective of this study is to investigate whether market efficiency changes in cyclical version over time, according to the AMH. The second objective is to evaluate the effect of market conditions (up, down, bull, bear, normal) on return predictability. The third objective is to analyse whether calendar anomalies disappear and reappear over time. The fourth objective is to determine how the anomalies behave under different bull and bear market conditions. Various linear testing tools such as the variance ratio test, the autocorrelation test, the unit root tests and the nonlinear of BDS were implemented in rolling window approach to track time-variation in efficiency. A dummy regression model was used to evaluate the market condition effect on return predictability. This study also explored rolling window analyses of several alternative variants of nonlinear models of the GARCH family, to track variation in the behaviour of days-of-the-week (DOW), months-of-the-year (MOY) and intra-month effects. Lastly, the study modelled the switching behaviour of the calendar anomalies under bull and bear conditions by using the Markov switching model (MSM), which is able to generate regime-specific regression results for the calendar anomalies under consideration. Findings from the various linear and nonlinear tests revealed that there are cycles of significant linear and nonlinear dependence and independence in each of the five markets, suggesting bouts of predictability and unpredictability. The regression analyses of return predictability against series of market condition dummies revealed that high predictability is associated with the bull, volatility and financial crisis periods, especially in NGSE, SEM and TSE and not in others. It suggests that the effect of market condition cannot be generalised for all markets. Further, rolling GARCH estimations showed that calendar anomalies disappear and reappear over time in line with the AMH. The evaluation of calendar anomaly under AMH provides a clearer picture of the behaviour of African stock markets as adaptive. Finally, the empirical results revealed that regime-switching is an important feature of calendar anomalies and that a calendar anomaly that is found in a bull regime tends to disappear or weaken in a bear regime and vice versa, depending on the market and the calendar anomaly in question. This study adds to the extant literature on the AMH in Africa and global markets. First, it shows that African stock markets are adaptive. Thus, it is more appropriate to describe African markets as adaptive markets rather than inefficient markets. Secondly, it provides empirical evidence of efficiency cum market condition in African stock markets. Thirdly, the study represents a timely contribution on calendar anomalies under AMH in African stock market. Fourthly, by evaluating DOW, MOY and HOM effects under AMH, this study extends the existing works on Monday and January effects in developed markets. Additionally, this study shows the usefulness of MSM in evaluating calendar anomalies under AMH.
Country risk components and financial asset markets interdependence: evidence from South Africa=Izinkomba-ngozi Zezwe Kanye Nokubambisana Ezimpahleni Zomnotho Ezimaketheni: Ubufakazi Obuvela eNingizimu Afrikha.
(2023) Nhlapho, Rethabile Nokulunga.; Muzindutsi, Paul-Francois.; Obalade, Adefemi Alamu.
Over the last few decades, financial markets have become more interlinked. As a result, there has been an increased demand for information across markets and thus, a need for country-specific risk ratings. Risk ratings are vital for attracting investments and capital inflows in financial markets by providing signals regarding a country’s economic, financial and political fundamentals. However, there remains a lack of consensus on the nature of the relationship between country risk and key asset markets, namely, the stock market, bond market, housing market, and gold and oil markets. This doctoral study evaluates the impact of country risk components on asset returns and their interlinkages for the period from February 2000 to December 2019 within the South African context. The first analytical paper (presented in Chapter 3) evaluates the dynamic relationship between South African asset markets using the Markov Switching Vector Autoregressive (MSVAR) model. The findings showed that the response of all asset returns to shocks in the economic system was regime-dependent. Moreover, shocks emanating from the exchange rate market and bond market explained most of the variation in the bull and bear regimes. The second paper (presented in Chapter 4) investigates the impact of country risk on various asset markets ing a Non-Linear Autoregressive Lag model (NARDL). This study fills the gap in understanding the reaction of stock, bond, housing, currency, gold and oil markets to positive and negative innovations in country risk components. The findings show evidence of long-run cointegrating relationships between asset returns and country risk components and indicate that country risk components are effective determinants of domestic asset market returns. The third paper (presented in Chapter 5) examines the effects of economic, financial and political risk on asset market linkages using a combination of the Dynamic Conditional Correlation Generalised Autoregressive Conditional Heteroscedasticity (DCC-GARCH) and NARDL models. The findings show that the correlation between asset markets was positive in stable market conditions and showed negative comovements during periods of market turmoil. Financial and political risk ratings were found to be the main drivers of asset market comovements in the short run. Anincrease in South African (domestic) political risk had a larger effect in the long run and was found to be an important determinant of asset return comovements. This result provides evidence suggesting that asset markets are informationally inefficient and changes in financial and political risk ratings can be used to predict price movements. Overall, this doctoral dissertation’s findings highlight the diversification benefits of domestic assets during periods of market uncertainty. Moreover, the results show that examining the different components of country risk provides better insight into the impact of country risk on asset markets. The results of this dissertation have significant implications for asset allocation decisions and risk management. From a policy perspective, it is crucial to formulate policies that address political instability as it plays a pivotal role in determining asset return behaviour, and consequently, the financial stability of the country. Furthermore, the results have implications for traditional asset pricing models that only capture the effects of market risk to predict future asset market behaviour. A more comprehensive understanding of the risks of specific markets is vital for more informed financial decision-making. Future research could extend the scope of the study to investigate the composite political risk factors that explain asset market behaviour. Iqoqa Ukuqagula ngenzuzo yempahla kusemqoka, ikakhulu ezimaketheni ezisathuthuka, ikakhulu ngoba abatshalizimali emhlabeni bazifaka engozini enkulu ngenxa yalezi zimakethe. Okugcina ngokuthi kube nesidingo esikhulu sokuthi amazwe afakwe esikalini njengalokhu ababambi-qhaza kwezomnotho befisa ukunciphisa ubungozi abazifaka kubo. Ukukalwa kobungozi kubalulekile ukuheha abatshali zimali kanye nokuhelela kwengqalabhizinisi emaketheni yezimali ngokunika izinkomba zomnotho, ezezimali kanye nesisekelo sezombangazwe wezwe. Kushosha ukuvulana komsuka wobudlelwane phakathi kobungozi obuthathwa yizwe, singabala isitokwe semakethe, imakethe yesivumelwano sembolekomali, imakethe yezindlu kanye nemakethe yegolide nemakethe kawoyela. Lolu cwaningo luhlole ubudlelwane phakathi kwezimpahla ezisezimakethe eNingizimu Afrikha kusetshenziswa imodeli i-Markov Switching Vector Autoregressive (MSVAR) nemodeli i-Dynamic Conditional Correlation Generalised Autoregressive Conditional Heteroscedasticity (DCC-GARCH). Umthelela wobungozi obuthathwa yizwe enzuzweni yempahla kanye ne-covariance yayo ihlolwe kusetshenziswa imodeli i-Non-Linear Autoregressive Lag (NARDL). Ngaphezukwakho konke, imiphumela iveze ukwehluka kwenzuzo empahleni yangaphakathi ngesikhathi sokungazinzi kwezimakethe. Imiphumela yocwaningo iveza ukuthi izimpendulo zayo yonke inzuzo yezimpahla azinalo uzinzo kwezomnotho kuncike kuHulumeni osuke uphethe. Ukungazinzi okusukela enanini lokuhwebelana kwezimakethe kanye nesivumelwano sobolekomali ezimaketheni kucacise ukungefani okuningi koHulumeni be-the bull and bear regimes. Ubungozi bezomnotho nezepolitiki kube yikho okuyizizathu zesixakaxaka ezimpahleni zezimakethe, esikhathini esifushane. Ukuthuthuka kobungozi kwezepolitiki eNingizimu Afrikha (ngaphakathi) kube nomthelela ngokuhamba kwesikhathi kwaphinde kwaba nesandla kwi-asset return linkages. Lokhu kuchaza ukuthi izimpahla zezimakethe azinalo ulwazi oluphelele kanye nezinguquko zokukalwa kwezomnotho nezepolitiki kungasetshenziswa ukuqagula ukunyakaza kwamanani. Imiphumela isemqoka kakhulu kubabumbi-zinqubomgomo, kangangoba, izinqubomgomo mazibunjwe ukudambisa ukungazinzi kwezepolitiki njengoba ineqhaza elibalulekile kwezomnotho wezwe. Ngaphezu kwalokho, imiphumela inomthelela kumamodeli ajwayelekile e-asset pricing avame ukuveza umthelela wobungozi bezimakethe ukuqagula ikusasa lezimpahla nemikhuba yakhona. Ukuqonda ubungozi ngokusabalele kwezimakethe kubalulekile ekuthathweni kwezinqumo ezinqala kwezomnotho.
Effectiveness of credit risk management practices of Ghanaian commercial banks in agricultural finance.
(2021) Nyebar, Abraham.; Muzindutsi, Paul-Francois.; Obalade, Adefemi Alamu.
Lending to the agricultural sector by commercial banks in Ghana is characterised by high credit risk even though empirical evidence suggests that commercial banks can minimize this exposure by using appropriate practices to mitigate against adverse effects. This implies that the credit risk management practices adopted by Ghanaian commercial banks may be inadequate and ineffective due to credit risk identification challenges or problems in implementing credit risk management policies. The study investigated the methods adopted by commercial banks to identify credit risk, the effectiveness of the implementation of credit risk management policies, and the strategies used by Ghanaian commercial banks to mitigate credit risk in agricultural finance. The mixed methods approach, involving the use of quamtitative method using survey questionnaire and qualitative method through interviews and policy documents, was adopted. Data were analysed using Principal Components Analysis (PCA), ANOVA and MANOVA, documents, and thematic analysis. Findings indicated that some of the methods used by commercial banks to identify credit risk in agricultural finance do not meet commercial banks’ credit risk management needs. Also, some other methods that proved effective in minimising credit risk were not frequently used by commercial banks. Also, most Ghanaian commercial banks lacked technical units and technical employees with agricultural training backgrounds to manage the credit related to agricultural finance. Further, agricultural activities lacked insurance schemes to protect against credit risk. The ANOVA and MANOVA tests showed significant differences in credit risk management practices among Ghanaian commercial banks. The study recommeneded the need for a robust credit risk management strategies to mitigate credit risk in agricultural finance. The agricultural sector should be supported with refined policy and implementation documents informed by the reality of borrowers’ inability to honour loan contracts. The findings point to the needs to increase credit guarantee schemes and create incentive-based risk-sharing systems for small and medium agriculture enterprises; and establish more robust credit referencing bureau institutions to reduce credit risk.
The effectiveness of electronic fiscal devices in ensuring tax compliance among small business owners of Arusha-Tanzania.
(2020) Malima, Agnes Elson.; Pillay, Surendran.; Obalade, Adefemi Alamu.
This study assessed the contribution of Electronic Fiscal Devices (EFDs) in tax compliance among small business owners of Arusha, Tanzania. The government of Tanzania invests effort to ensure that revenue adequately supports development projects; however, there is continued reliance on external sources of funds to support development projects. This poses a question on how the introduction of EFDs would increase tax compliance for sustainable government income generation. The first objective of the study determined whether the fear of whistle-blowers impacts the rate of using Electronic Fiscal Devices. Secondly, the study determined whether the perceived level of punishment due to non-compliance impacts the rate of EFD use. Furthermore, the study determined the impact of EFD use on audit effectiveness, the level of transparency and fairness in tax procedures. Lastly, the study determined the impact of EFD use, the level of transparency, fairness in tax procedures, and the audit effectiveness on tax compliance. Overall the study used mixed methods. In addition, the study used a quantitative sample of 279 respondents obtained through systematic sampling. Also, it used a qualitative sample of 10 respondents obtained conveniently. Additionally, face and content verification were used for validity confirmation, and the Cronbach Alpha tested the reliability of the data. All quantitative questions used a 5-level Likert scale. Data was analysed using descriptive procedures, One Way ANOVA, Chi-Square, and ordinal regression. The following were the findings of the study: First, the fear of whistle-blowers determined the rate of using EFDs. On the other hand, audit effectiveness impacted tax compliance. Lastly, the use of EFDs in tax audits impacted tax compliance.
The potential impact of Basel IV requirements on performance and resilience of commercial banks in Africa.
(2020) Oyetade, Damilola Tope.; Muzindutsi, Paul-Francois.; Obalade, Adefemi Alamu.
Capital adequacy is considered an important determinant for the performance and resilience of banks because the banking sector plays a substantial role in the stability and growth of the economy. Literature shows that well-capitalised banks are associated with higher profits. Banks in Africa have revenue growth opportunities, but fragility and vulnerability to bank failures arising from capital inadequacy, non-performing loans and weak banking regulatory requirements restrict their lending capacities to support economic growth. The Basel Committee’s aim for introducing higher Basel capital requirements is to strengthen the resilience of the banking system; however, most of the African countries are slow in embracing changes in Basel regulatory requirements. Nevertheless, the implementation of higher Basel capital may affect the performance and lending ability of banks. This study examines the potential impact of Basel IV capital requirements on performance, lending, securitisation, and resilience of commercial banks from selected African countries. To achieve the set objectives, the study simulates Basel IV capital ratio using historical data from 2000 and 2018 because the implementation of Basel IV capital requirements has not commenced. In this context, the study created sample-representative banks and employed static and dynamic panel regression analyses as the estimation techniques. The results suggest that Basel IV capital requirements portend short-term negative impacts on bank performance and lending, while the long-term impact on bank performance is favourable. In addition, the findings show that higher capital requirements have a significant impact on the volume of securitisation and protect the banks from securitisation exposures; however, increasing volume of securitisation does not impact performance. Finally, capital adequacy positively impacts bank resilience and suggests that banks with a low level of capital are prone to banking distress, while banks with high capital improves resilience.