Asset price volatility in South African markets during financial crises

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dc.contributor.advisor Prof. A. Kabundi; Dr. G.D. Liu en_US
dc.contributor.author Duncan, Andrew Stuart
dc.date.accessioned 2012-10-09T07:46:10Z
dc.date.available 2012-10-09T07:46:10Z
dc.date.issued 2012-10-09
dc.date.submitted 2012
dc.identifier.uri http://hdl.handle.net/10210/7830
dc.description Ph.D. en_US
dc.description.abstract This thesis investigates the impact of domestic and foreign financial crises on volatility dynamics in South Africa. In a sample ranging from January 1994 to March 2009, Chapter 2 provides empirical support for the theory that domestic currency crises are associated with significant structural changes in daily exchange rate volatility. Speciacally, crisis periods coincide with large positive shifts in unconditional variance. Using this fact, we propose a new method - the structural change generalised conditional heteroskedasticity, or SC-GARCH, model - for identifying precise start- and end-dates for crises. Chapter 3 studies volatility transmission within SA from October 1996 to June 2010. Using a generalised version of the vector autoregressive (VAR) approach, time-varying and bidirectional volatility spillover indices are esti- mated for domestic currency, bond and equity markets. The results identify equities as the primary source of volatility transfer to other asset classes. At di erent points in time, spillovers are responsible for anywhere between 7.5 and 65 percent of system-wide volatility. Local maxima in spillover magni- tudes are estimated during domestic, as well as foreign crisis periods. Chapter 4 estimates time-varying comovement between SA and world volatilities during the period from 1994 to 2008. A dynamic factor model (FM) is used to extract three latent global volatility factors from a data panel which is representative of the world equity market portfolio. Relative to most other emerging markets, the global factors are poor predictors of volatility in SA. However, SA's comovement with global volatility increases sharply in response to emerging market crises in Asia (1997-8) and Russia (1998). The global factors are also important determinants of domestic volatility during the latter stages of the US subprime crisis (2007-8). Chapter 5 proposes the factor-augmented VAR as a parsimonious model for the transmission of foreign volatility shocks to SA equities. We compare international volatility transmission resulting from crises in Asia (1997-8) and the US (2007-8). Although the US crisis has a larger impact on the world equity market, the Asian shock leads to more dramatic increases in volatility in emerging economies, including SA. en_US
dc.language.iso en en_US
dc.subject Financial crises en_US
dc.subject Capital assets pricing model en_US
dc.subject Stock exchanges en_US
dc.subject Stocks - Prices en_US
dc.title Asset price volatility in South African markets during financial crises en_US
dc.type Thesis en_US

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