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Masters Degrees (Finance)

Permanent URI for this collectionhttps://hdl.handle.net/10413/16535

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Browsing Masters Degrees (Finance) by Subject "Asymmetric adjustment."

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    An analysis of share prices and economic activity in South Africa: an NARDL approach.
    (2021) Naidoo, Thiasha.; Moores-Pitt, Peter Brian Denton.
    An integral component of economic activity rests on the performance of share prices as it influences consumer and business confidence which in turn affects the performance of the overall economy. The progressive characteristics of share prices and its successive role as an indicator of economic growth has been widely documented in advanced and developing economies such as South Africa but with evidence allowing for nonlinearity and asymmetric movements, being less predominant. The key objective of this thesis is to re-examine an existing issue by using a more complex method of analysis to determine whether fluctuations in the stock market influence the economic growth in South Africa. This study assesses share price fluctuations and its impact on economic growth, with the aim of identifying the nonlinearity and asymmetric effects in the relationship by taking into consideration a primary and sectoral analysis, within a South African context. As such, this study utilised various different methodological techniques that established cointegration; identified the existence of structural breaks; detected long and short-run relationships and determined the effects of nonlinearity and asymmetric adjustments between the stock market and economic activity, covering the period of 1999 to 2019. It was established that the relationship between economic growth and stock prices exhibit evidence of structural breaks. Furthermore, it was concluded that there is a strong link between the stock market and economic activity with the 2007/2008 global financial crisis. Most importantly, this thesis intended to determine the nonlinearity and asymmetric impacts that stock market fluctuations have on economic activity in South Africa. It was exhibited that there is evidence of strong nonlinear cointegration in the relationship. Additionally, there is a strong presence of nonlinearity and asymmetric adjustment in the relationship between stock market fluctuations and economic activity. Therefore, this study concluded that there is strong evidence of nonlinearity and asymmetric adjustment in the cointegrating relationship and depicted that economic growth is sensitive to stock market fluctuations in South Africa, which represents a novel contribution to the literature.
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    Residential property as a hedge against inflation in South Africa.
    (2021) Ramsaran, Nikita.; Moores-Pitt, Peter Brian Denton.
    The empirical evidence regarding the magnitude of the relationship between inflation and residential property has had conflicting results. Although the issue of inflation-hedging has been discussed by multiple authors, the results have been inconsistent with regard to the ability of property to act as a hedge against inflation. This topic has been explored largely in an international context, with limited studies on South African grounds. Over the years the topic of inflation-hedging has been examined using multiple cointegration techniques, which have been adapted over the years to accommodate various limitations. The conventional Autoregressive Distributive Lag (ARDL) model has been a solid model for the purpose of this topic as it has proven to have various advantages over other models. However, this model assumes linearity and symmetry with regard to the relationship. In order to overcome the limitations of this model, the Nonlinear Autoregressive Distributive Lag (NARDL) model was developed, as it accounts for possible asymmetric adjustment. Both these models were employed for the purpose of this study with the intent of determining whether the relationship between the variables is nonlinear and asymmetric. This study utilized quarterly data for a 30-year time period from 1989-2019, a period which was extremely relevant in the context of South African history, because of the transition period from the apartheid regime. The data chosen for the inflation rate is represented by the consumer price index (CPI) and housing prices was represented by both the housing price index (HPI), as well as segmented housing prices. The results from this study confirmed that property is able to hedge against inflation, with strong evidence supporting the existence of an asymmetric relationship between the variables. All segments were confirmed to effectively hedge against inflation, with only the affordable segment being a partial hedge for the purpose of the NARDL model. Evidence of asymmetry was confirmed, indicating that when inflation increases, housing prices increase at a rate greater than unity. However, in periods of decreasing inflation, the increase in absolute value is far greater. Investors can, therefore, profit off investing in property during all inflationary periods, and generate greater wealth in periods of decreased inflation.