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The effect of systematic risk factors on stock returns in a developing country : the case of South Africa

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dc.contributor.advisor Prof. Riette Eiselen and Prof. Henco van Schalkwyk en_US
dc.contributor.author Chawana, Munyaradzi
dc.date.accessioned 2012-06-07T11:45:18Z
dc.date.available 2012-06-07T11:45:18Z
dc.date.issued 2012-06-07
dc.date.submitted 2011-10-06
dc.identifier.uri http://hdl.handle.net/10210/5047
dc.description M. Comm. en_US
dc.description.abstract For many years in finance literature and practice, the Capital Asset Pricing Model (CAPM) has been recognised as the major framework for analysing the cross-sectional variation in expected asset returns. The CAPM is structured on the belief that stock returns are influenced by just one risk aspect of the macro economy, market fluctuation. With the market portfolio at the centre of the CAPM, the critical point in employing the model is the estimation of the true market portfolio. Thus, an imperfect approximation of the market portfolio leads to an imperfect measure of the risk-return relationship. With this impediment of the CAPM, the Arbitrage Pricing Theory (APT) of Ross (1976) has been proposed as an alternative to the CAPM. Based on the premise that there are multiple factors that represent the fundamental risks in the economy and involving no market portfolio, the APT has attracted a lot of attention in finance literature. However, in contrast to the voluminous research in developed markets relating stock returns to more than one source of systematic risk factors (multifactor models), research in emerging markets is scant. This study, conducted using an APT framework, investigates from a developing market perspective the relationship between stock returns of JSE Limited-listed companies and pre- specified macroeconomic variables of: economic activity, inflation, term structure and oil prices. The analysis is conducted with monthly data from the South African stock market and aggregate economy over the period January 2000 to December 2009. Following Chen, Roll and Ross (1986), the study utilises the Fama and MacBeth (1973) two step procedure. Within the scope of the methodology and data employed, the results of this study provide a different perspective for South Africa from that found for the US by Chen et al. (1986). Consistent with Martinez and Rubio (1989) for Spain and Poon and Taylor (1991) for the UK, the findings of this study suggest that none of the risk factors found to be significant in Chen et al. (1986) are priced in the South African case. en_US
dc.language.iso en en_US
dc.subject Stocks en_US
dc.subject Stocks - Rate of return en_US
dc.subject Financial risk management en_US
dc.title The effect of systematic risk factors on stock returns in a developing country : the case of South Africa en_US
dc.type Mini-Dissertation en_US

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