Browsing by Author "Willows, Gizelle"

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    A woman's worth: the impact of board bender diversity on company performance - a cross-country analysis
    (2021) Jakoet, Nuria; West, Darron; Willows, Gizelle
    Purpose: The study aims to investigate whether female representation on corporate boards impacts company financial and non-financial performance. Existing studies show conflicting results regarding the impact that female representation on the boards of directors may have on financial and non-financial performance, namely social and environmental performance. Studies suggest that critical mass may influence the impact that a woman on the board may have on company performance. Existing studies have observed behavioural changes in female directors when there are three or more women on the board compared to when there are less than three women on the board. The study will explore the effects of critical mass on the impact of board female representation on firm performance. Furthermore, studies posit that singlecountry studies contribute to conflicting results due to the influence of country-level factors. Country-level factors (including cultural norms, gender parity in terms of educational attainment, economic employment and opportunity) may influence the level of impact that female representation on the boards of directors have on company performance. Thus, this study explores whether country-level factors influence the impact of board female representation on company performance. Design: Using a linear mixed regression, an analysis of female representation (as measured by the percentage of women on the board and critical mass) of the top 100 listed companies from Australia, Japan and South Africa between financial and nonfinancial performance during 2016 to 2018 is performed. Both accounting and market measures are used to determine a holistic measure of financial performance. Nonfinancial performance is measured using a social and environmental performance score. To determine the influence of country level factors, interaction terms are used to compare the level of impact that female representation on the boards of directors have on company performance between Australia, Japan and South Africa. In addition, an analysis of the mean female representation by country is conducted to understand the existing level of female representation per country. Findings: The descriptive statistics show that female representation was highest in Australia with an average of 29% over the three-year period; South Africa was at 22% and Japan at only 7%, demonstrating that each country in the study has varying levels of female representation on the boards of directors. The regression results show that female representation on boards of directors, as measured by the percentage of women on the board, is shown to have a positive and significant relationship with accounting performance, market performance and social performance. Critical mass of female representation on corporate boards is shown to positively and significantly influence financial performance but has little impact on non-financial performance. Conversely, country-level factors do not significantly influence the level of impact of female representation on performance measures. However, the descriptive statistics suggest that country-level factors are shown to influence the number of women on the boards of directors. Originality and Value: This study is relevant to shareholders and stakeholders when considering board composition and the value of gender diversity on corporate boards for both financial and non-financial performance. In addition, this study aids the understanding of the current status of female representation on boards of directors. The study adds to the existing body of research by exploring the influence of critical mass and country-level factors on the impact of board gender diversity on company performance. Lastly, the study is relevant to regulators and policy-makers as it highlights factors which contribute to increased female representation on corporate boards.
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    Assessing the impact of language on the measurement of financial literacy
    (2022) Mathebula, Woxy; Willows, Gizelle
    Research in the field of financial literacy has found that black people and other minority groups, globally, underperform in financial literacy assessments, in comparison to their white counterparts. Multiple factors have been identified in literature, which try to explain the distribution of financial literacy results across demographic groups. However, none of these factors fully explain the disparity. Language has been identified as a potential factor, yet no studies have specifically explored this. A common characteristic among the underperforming group is that financial literacy assessments typically are not conducted in the participants' primary language. This paper aims to explore the impact of the language of assessment by testing whether assessing individuals in their primary language would improve their financial literacy scores. A quantitative research methodology was applied to surveys, which were disseminated in both English and isiXhosa (an African language). The survey performed is in line with existing financial literacy assessment however this study is made unique by controlling for language, to isolate its impact on the results. Statistical analysis of 240 respondents found that language was not the issue. Instead, in line with the findings of existing literature, self-efficacy and educational background are significant in determining financial literacy. These findings are key to financial literacy research and will help in the creation of financial literacy interventions. While there are no retrospective interventions for educational background, self-efficacy can be improved through targeted financial literacy intervention programmes designed to bridge the gap in financial literacy across racial groups.
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    Better than average: An investigation of overconfidence in South Africa
    (2014) Dowie, Glen; Willows, Gizelle
    This dissertation examines overconfidence in an investing environment to determine if there is evidence of the phenomenon amongst a sample of academics at participating universities. A survey was sent out to over 6 000 staff members at four South African universities assessing respondents’ ability to estimate their return earned in unit trusts in which they were invested, as well as assessing whether they would adjust their estimate when presented with an anchor (the relevant JSE All Share Index return). 466 completed responses were obtained, of which 81 respondents indicated that they were invested directly in a South African equity unit trust to allow for statistical testing. The data obtained were analysed for evidence of overconfidence and anchoring by comparing respondents’ estimates of fund returns against historical returns and then checking whether they adjusted their estimate after being presented with an anchor. It was found that investors were under-confident rather than overconfident with women giving lower, and thus more under-confident estimates than their male counterparts. Furthermore, it was found that older respondents were better able to estimate their past returns than younger respondents. The presence of an anchor appeared to have no effect on respondents’ estimates.
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    The disposition effect in South African Equity markets
    (2014) Bashall, James; West, Darron; Willows, Gizelle
    The “disposition effect” describes the propensity for investors to realise gains sooner than losses through selling profit making investments more readily than loss making investments. This behaviour has been observed in financial markets across the world and across all investor classes, albeit to varying degrees. Such trading behaviour has been found not to be profit or utility maximising. I n the absence of rational motives for the disposition effect, it is concluded as being an irrational feature of investor trading behaviour. In search of the reason behind this behaviour, behavioural finance is turned to. No concrete justification for the disposition effect has been isolated as being the sole cause for this apparently irrational trading behaviour. This study tests for the disposition effect in a South African context across two classes of non-professional investors: those acting in their own capacity, and those acting with the assistance of professional investment advisors. The trade history of a sample of 4 840 investor accounts from a South African stockbroker was analysed over the five year period from October 2008 to October 2013. Three primary issues were addressed: (i) whether South African investors exhibit the disposition effect, (ii) if this behaviour is reduced by non-professional investors through the employment of professional advice, and (iii) if this trading behaviour can be justified based on rational g rounds in a South African context. The results showed, consistent with studies elsewhere in the world, that individual investors in South Africa do exhibit the disposition effect both when acting in their own capacity and when acting with the assistance of professionals . Investors acting with the assistance of professional advisors are found, however, to show the effect to a lesser extent. Further, trading consistent with the disposition effect by investors acting with the assistance of professional advisors is found to be rationally justifiable on the grounds of portfolio rebalancing. It is therefore concluded that professional advice reduces the extent to which this irrational trading behaviour is exhibited, thereby increasing investor profits and utility.
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    Exploring a South African solution to an international concern over auditor independence: The South African audit profession's opinions with regard to mandatory audit firm rotation
    (2016) Harber, Michael; West, Darron; Willows, Gizelle
    The provision of assurance services, most notably the audit function, is an activity of public protection that requires a high degree of independence between the auditor and the audit client to ensure audit quality is achieved. Internationally, especially in the European Union, there is a legislated move towards mandatory audit firm rotation (MAFR) to ensure auditor independence. South Africa is currently faced with the decision of whether to change legislation and follow suit. Using a qualitative and descriptive methodology, through the use of semi-structured and open interviews with experienced South African audit partners, the direct and indirect effects of mandatory firm rotation on the audit profession was explored. This study will therefore present the opinions of the regulator and a small group of experienced audit partners, most being regional or national managing partners, from audit firms that perform public interest entity audits. Of particular interest will be the opinions of the respondents around (1) the state of independence in South Africa, (2) whether mandatory audit firm rotation will increase audit quality, (3) whether there are better alternatives to mandatory audit firm rotation, and (4) what the perceived direct and indirect effects of mandatory rotation will be within the South African legal and regulatory context. A particular emphasis is also placed on the argument from the national audit regulator that mandatory audit firm rotation, in addition to strengthening independence, will also reduce market concentration (promote competition) in the South African audit industry, as well as promote black economic transformation. The results show significant disagreement by the audit practitioners against the arguments in favour of mandatory audit firm rotation, with most claiming that it will not achieve an increase in audit quality and will produce many unintended consequences that will in their opinion actually reduce audit quality. There is a significant amount of agreement amongst the audit partners on the key issues and no partner interviewed is fully in favour of changing legislation to require MAFR. A number of alternative means for improving audit quality are suggested, which in the opinion of many of the partners, will be less damaging to audit quality and the audit profession.
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    Exploring the perspectives of audit committee members on mandatory audit firm rotation in a South African context
    (2018) Thomson, Chelsea; Willows, Gizelle
    This study examines the perspectives of experienced audit committee members on mandatory audit firm rotation (MAFR) in a South African context. This follows the recent initiatives by the Independent Regulatory Board of Auditors (IRBA) to make audit firm rotation compulsory in South Africa. Semi-structured, in-person interviews were conducted with audit committee members in South Africa to explore and contribute to the existing literature on audit committee member positions on MAFR. Twenty-two audit committee members were interviewed. Key discussion areas revolved around the regulator’s intended impact of MAFR in South Africa, including the promotion of auditor independence, the lowering of audit firm market concentration and acceleration of the rate of transformation in the South African audit industry. The findings show a general consensus among the audit committee members interviewed that MAFR will not achieve any of the objectives of the IRBA and that the members are predominantly in opposition of MAFR. Furthermore, the members proposed various arguments against MAFR, illustrating how the policy has limited benefits, if any, and will introduce many monetary and non-monetary costs into the audit industry, which could negatively impact the appeal of the audit industry. The vast majority of members held the view that the primary purpose of MAFR in South Africa is not to promote auditor independence, but is rather intended to address market concentration and transformation. However, the findings indicate that MAFR is believed to not be the best solution for these issues and, as such, further research and alternative measures should be sought by the regulator.
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    Herding behaviour by South African unit trusts in the consumer services sector
    (2017) Abramson, Simone Nicole; West, Darron; Willows, Gizelle
    This study examines whether there is herding by general equity unit trusts as investors in the consumer services sector in South Africa. It also investigates whether herding was more prevalent during the financial crisis period in South Africa between 2008 and 2010, than during a non-crisis period. Using a herding measure developed by Lakonishok, Shleifer and Vishny (1992) (LSV), it was found that there was indeed herding behaviour by general equity unit trusts in the consumer services sector. A herding rate (i.e. the proportion of trades by general equity unit trusts in the consumer services sector in excess of the expected random and independent proportion) of 7.75% is calculated. Possible reasons for herding in the consumer services sector include; consumer services companies being profitable investments and a small number of investment analysts in South Africa. It was also observed that herding behaviour was not more prevalent during the financial crisis period (12.14%) than the non-crisis period (6.36%), as these two periods were not statistically different from one another, even though the average herding rates differed.
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    How Industry Concentration Influences the Performance of South African General Equity Funds
    (2018) Morton, Bronté; Willows, Gizelle
    Individual investors can invest in equity either through trading accounts provided by financial institutions or in equity funds with a fund manager. Fund managers will make different investing decisions that either negatively or positively influence the performance of the funds that an investor chooses to invest in. One such decision is the concentration of the fund in different companies, countries and industries. This research aims to determine how industry concentration influences the performance of South African general equity funds. Concentration is calculated using the industry concentration index formula. Over the period from 2006 to 2017, a mixed model regression, which accounts for both fixed and random effects, is used to determine the impact of concentration on fund performance. A random effect model was used as it models the variability between funds. The fixed effects that were controlled for in the model are concentration, the fund size, the gender and number of managers and the current market cycle which indicates whether the market was experiencing a financial crisis or not. The regression model is run over two models, each with two stages. Model 1 and Model 2 differ in that Model 1 includes year and quarter data as one fixed effect for time. In Model 2, the year and the quarter are included as two separate fixed effects. Stage 1 and Stage 2 differ in that Stage 1 does not consider management team variables while Stage 2 considers all variables. This research differs from prior research by considering the impact of concentration in specific industries as well as accounting for whether the market was experiencing a financial crisis or not. This research concludes that industry concentration can economically impact the performance of South African general equity funds and that, whether this impact is positive or negative depends on the industry in which the fund is concentrated.
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    Invest like a woman: an analysis of investment performance in South Africa based on gender
    (2014) Marszalek, Bartosz; West, Darron; Willows, Gizelle
    The rise in popularity of behavioural finance has illustrated how investors do not always act and invest rationally, and as such do not always maximise their utility. Researchers in the field of behavioural finance have found that certain behavioural biases that exist in humans can explain these deviations from rationality by investors, and that certain biases manifest differently between male and female investors. Men have been found to be more overconfident in their skill in investing than women, and to rate their chances of investing successfully as greater than women rate their chances of investing successfully. Further, men have been found to display higher risk tolerances than women, stronger self attribution and self-efficacy biases, as well as a propensity to overtrade when compared to women.
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    'It's a long story…' - Impression Management in South African Corporate Reporting
    (University of Cape Town, 2020) Jugnandan, Shreeya; Willows, Gizelle
    Research in the field of impression management has presented evidence that suggests as a company's performance declines, the readability of its financial reports also declines in order to confound the user. In an attempt to determine whether similar impression management strategies are implemented amongst South African listed public companies, a mixed-effects linear regression model was applied to analyse data over the period 2016- 2018. Performance was regressed to the report readability measures over time, where readability was divided into the aspects of length (through the word count) and complexity (as quantified by the Gunning Fog Index). The findings indicate that as the financial performance of a South African company declines, the length of all its reports increases: including the annual financial statements, Integrated Report and the annual results market announcement. However, there is limited evidence of a relationship between complexity and performance. Therefore, when South African companies perform poorly, despite producing lengthier reports, the complexity therein is not impacted. These results thus caution users when faced with reports that are unusually lengthy in nature, because this trait could signal poor performance. Users are advised accordingly to critically analyse excessively lengthy reports in order to separate decision-useful information from the impression management related content elements. Lastly, this research contributes to the foundation of impression management research in the context of the South African capital market and puts forward several suggestions for important future research.
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    Magic formula optimisation in the South African Market
    (2017) Ker-Fox, Jason G; West, Darron; Willows, Gizelle
    The purpose of this study is to investigate the performance of the value investing strategy commonly referred to as the "Magic Formula", which was first introduced by Greenblatt (2006) and uses the return on capital and earning yield ratios as the basis for stock selection, in the South African market. The study will build on the work previously performed by Howard (2015) by challenging the "Magic Formula" portfolio composition assumptions. In doing so, optimal combinations of holding period and portfolio size which: maximise the geometric mean return, minimise the volatility of returns and maximise the risk adjusted return, shall be determined. The scope of this study includes all companies, excluding financial services entities, listed on the Johannesburg Stock Exchange, which exceed a market capitalisation of R 100 million, for the period 1 October 2005 to 30 September 2015. The results showed that by adjusting certain portfolio parameters the overall performance of the "Magic Formula" on both a geometric mean and risk adjusted basis can be increased. However, the "Magic Formula" still provides an insufficient amount of evidence to conclude, on a statistically significant basis, an outperformance of the investment strategy relative to the Johannesburg Stock Exchange All Share Index. Accordingly, the study makes several contributions to the literature. Firstly, it provides direct evidence of the relationship between value investing portfolio composition and the returns generated, indicating that excess returns can be achieved when the portfolio composition is adjusted. Secondly, albeit not on a
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    Men are from investment Mars and women are from investment Venus : further evidence of differential investment performance in South Africa based on gender
    (2014) Junor, Wesley; West, Darron; Willows, Gizelle
    There is an on-going debate amongst economists as to whether or not markets are efficient. The efficient market hypothesis is predicated on the assumption that investors are rational. The growing body of research in behavioural finance has challenged the rational investor theory, by showing that certain psychological biases affect the behaviour of investors in a manner which causes them to behave irrationally at certain times. The purpose of this paper is to gain further evidence of differential investment performance (which stems from some of these psychological biases) between genders in South Africa. A particular focus is on differences in risk aversion between genders. The data analysed suggests that men tend to hold riskier portfolios than women and tend to be more confident in their abilities than women are. A sample of 2,380 individual investors from a South African asset manager was analysed over ten years (1 January 2003 – 31 December 2012) in order to draw conclusions on the trading behaviour, resultant returns and variances in returns earned by men and women. The results show that there is a statistically significantly negative correlation between trading frequency and investor return. Over the ten year period analysed, there was no statistically significant difference between men and women either in returns earned or the variance of those returns. Further, there was no statistically significant difference between genders in trade frequency. However, in certain age groups and in certain sub-periods of the data, statistically significant differences between genders in both returns and variance of returns is observed, as well as statistically significant differences between the genders of trade frequency. Men had statistically significantly higher variances of their portfolio returns for the period from 1 January 2003 to 28 April 2006 (the period ending before the financial 3 crisis of 2008/9). Given that there is no significant difference in the investment returns earned by men and women in the same period, it follows that women were better investors (on a risk-adjusted basis) in this period. This may be explained by the fact that women are more risk averse than men and tend to hold less risky portfolios. Men had statistically significantly higher returns for their portfolios for the period from 1 May 2006 to 31 August 2009 (the period ending after the financial crisis of 2008/9). Given that there is no significant difference between men and women in respect of the variances of returns over this period, it follows men were better investors (on a risk-adjusted basis) for the period ending after the financial crisis. This could be due to men, being less risk averse than women, re-allocating their portfolio to riskier assets quicker than women after the financial crisis, and being better exposed to the upside of the market recovery. When stratifying the population into age groups to determine whether there is any differential behaviour on this basis, men in the 30 – 39 year old cohort were found to have a statistically significantly higher trade frequency than women. No other significant differences between genders within age groups were measured.
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    Money Arguments: The cause, the fix, and the role of the Financial Planner
    (2023) Faulmann, Simone; Willows, Gizelle
    There is much research within the field of financial conflict between couples; the available research conducted is as a result of the severity of such differences, which oftentimes result in irreconcilable arguments pertaining to money – and in some cases lead to the separation of couples as well as divorce. However, there is not much research into how couples solve their financial arguments. Counselling and financial therapy is still emerging in South Africa and therefore there may be a role for financial planners to assist. Financial planners are becoming more discerning and therefore may be positioned to assist their clients with more than their finances, especially money arguments. This research aims to identify how couples solve their money arguments and whether there is an opportunity for financial planners to assist in this regard. The research will also aim to establish whether there is a possible role for financial planners in this field. This study was completed by purposefully sampling and interviewing seven couples (comprising of 14 individuals) who were already engaging with a financial planner. These interviews were semi-structured, transcribed, and analysed using Thematic Analysis. It was found that the main cause of money arguments and the way couples solve money arguments are via good communication, shared financial goals, and thorough financial planning, including short-term and long-term budgeting. Furthermore, clients are willing for their financial planners to assist them with their money arguments. This will aid couples in resolving their money arguments. However, it is important that clients have a trustworthy relationship with their financial planners. It was found that the greater the level of trust between the client and the financial planner, the greater the willingness to accept assistance. In order to assist, however, financial planners may require further training or additional formal education in this field. Further research in this area could assist in decreasing the prevalence of financial arguments and lowering the risk of divorce.
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    Panda Flooring (Large Class Teaching Project)
    (2014-10-31) Davidson, Dhanyal; Herbert, Shelly
    This is a video demonstrating the manufacture and distribution of bamboo flooring, including the internal controls necessary in the business. All documents are also included, such as the customer invoice and delivery note. This video is based on a fictitious business.
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    Perceptions of Retirement Savings: Through the Lens of Black amaXhosa Women in South Africa
    (2021) October, Charne; Willows, Gizelle
    Much research has been performed on the quantitative amount of formal savings held by various racial and gender groups. Such research has often concluded that Black women are the least prepared for retirement. Therefore, a narrative of scarcity has been perpetuated without fully understanding the underlying reason “why”. These traditional accounts erase and reduce social phenomenon to simplistic representations without recognizing the vast complexities of retirement for Black amaXhosa women in South Africa. This research aims to address this gap by providing first-hand accounts of why Black amaXhosa women believe they are the least prepared for retirement, as well as the alternative ways in which Black amaXhosa women save. This research uses open-ended, face-to-face interviews to collect data. In analysing the interviews, the researcher used Thematic Analysis and the Theories of Intersectionality and Socialization to interpret and analyse the interview transcripts. The researcher specifically focused on the use of inductive, semantic analyzation. All interview participants understood the importance of having retirement savings and either have or had some form of retirement savings. However, low savings were often due to income covering the cost of living, the emergence of unexpected events, and Black Tax. Other themes that emerged are the distrust in the formal financial sector, lower levels of accumulated wealth, and the financial responsibility of motherhood. All participants, in some way, supplemented their savings through the use of informal savings. This research is the first of its kind as it aims to create a “conversation” around retirement savings. It offers an introduction into “why” Black women could be seen by previously reviewed literature to save less for retirement, as well as to identify the alternative ways in which Black amaXhosa women prepare themselves for retirement. This “why” can assist further research and policymakers to better understand the complexity with regard to saving for retirement.
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    Responsible leadership competencies in accounting education
    (2022) Miller, Taryn; Willows, Gizelle
    The business world continues to be plagued by incidents of leadership failure, including that of Chartered Accountants (CAs). Responsible Leadership (RL) theory was in part conceived in response to misconduct by business leaders. RL competencies overlap with many competencies expected of CAs, according to international education requirements that inform the CA curriculum. Yet studies continue to show that accounting students are underdeveloped in many competencies affiliated with RL. Furthermore, an institutional strategy for developing RL competencies in accounting students is currently lacking. The purpose of this study is to explore how to incorporate the development of RL competencies into the CA curriculum. The study is grounded within RL, Transformative Learning, curriculum, and curriculum change theories. A qualitative research method was adopted. Interviews were conducted with thirteen South African CA leaders holding a variety of societal and business roles, and eleven CA educators from several South African universities. The study identifies a strategy for RL competency development comprising seven core concepts known as the RESPOND model. Strategic considerations relating to 'what', 'which', 'when', 'where', 'who' and 'how', are addressed in the model. Practical recommendations based on the RESPOND model are provided. The study's findings may assist accounting academics deliberating on adaptations to their curricula to achieve competencies and graduate outcomes synonymous with RL. In addition, the RESPOND model provides a theoretical contribution to the advancement of both accounting education and RL theory by both connecting and expanding knowledge within these research fields.
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    She's built for it: differential investment performance in South Africa based on gender
    (2012) Willows, Gizelle; West, Darron
    Research in behavioural finance has shown that individuals do not always behave rationally. As a result of this they do not make investment decisions in such a way as to maximise their expect- ed utility. Certain behavioural biases have been found to explain this behaviour. Furthermore, differences have been observed in how these biases manifest in men and women. Men have been found to be more overconfident when estimating their own skills and chances of success. Hence, they tend to exhibit stronger self-efficacy and self-attribution biases. Differentials in the risk preferences of men and women are apparent: men display higher risk tolerances and women are more risk averse. A sample of 19,021 individual investors from a South African investment house was analysed over five years (2007 - 2011) in order to draw conclusions on the trading behaviour.
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    A taxing incentive? a comparison of retirement saving using discretionary investment and Regulation 28 in a Life-Cycle Model
    (2016) Burgers, Thomas; Willows, Gizelle; West Darron
    The purpose of this study is to investigate whether the limitations, imposed by Regulation 28 of the Pension Funds Act, encourage optimal asset allocation and reduce investment risk for retirement savings when contrasted to discretionary investment. A quantitative risk and return analysis was performed using available data for Regulation 28 compliant funds and the Johannesburg Stock Exchange indices. The analysis considers two hypothetical investors who are identical in all regards other than their choice of investments. The model used a 40 year working and saving horizon, whereby the investors contribute a portion of their income to a retirement savings vehicle of their choice. The savings in these vehicles accumulate and earn real returns until retirement. The analysis uses a life-cycle model (Modigliani & Brumberg,1954) which accumulates capital to the retirement date and retirement withdrawals that result in zero capital at the date of death, which is assumed to be 20 years postretirement. The model is used to analyse the differential return required in order to make investors indifferent between investing in a regulated product which is incentivised through tax credits. The findings indicate that Regulation 28 is effective in reducing the investment risk of retirement savings, however may also force the investor to sacrifice wealth. Discretionary investment may be preferential to an investor depending on the tax bracket the investor is in. Further, the complex calculations required to smooth consumption over the life cycle may contain too many variables for the ordinary individual to compute. This study is limited by assumptions regarding changes in future tax legislation, the time frame of investment returns for discretionary investment and retirement funds, inflation, investor career length and life expectancy.
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    The effect of South African and international macro-economic variables on the South African Stock Market
    (2018) Olivier, Alison Michell; Willows, Gizelle
    This study aims to answer the empirical question of whether South African and US macroeconomic variables are predictors of returns on the South African stock market. The results add to a body of literature, assessing the period from 1996 to 2016, which includes comparative analysis of data pre-and post the 2008 financial crisis. Furthermore, both local and US macro-economic variables are assessed. Variables selected include 1) GDP (SA and US), 2) Interest Rates (SA and US), 3) Inflation (SA and US), 4) South African Money Supply, 5) Rand/Dollar Exchange Rate, and 6) FTSE Index. These variables are assessed on a monthly and quarterly basis, to provide further information on whether the relationships between the selected variables and the stock market are affected by the timing of the data or the level of noise within the data set. The variables are tested using time series Ordinary Least Squares (OLS) regression analysis. This analysis is used to assess predictive relationships. The results show that South African Interest rates and the RandDollar exchange rate have a statistically significant negative relationship with the South African stock market. Additionally, the South African interest rate appeared to hold a more statistically significant relationship with the stock market when the change in the rate was high. Furthermore, the FTSE Index shows a consistent statistically significant positive relationship. These findings provide valuable information to investors who, with further testing to determine exact time lags, can consider these predictive variables when making investment decisions, assuming weak form efficiency exists within the market.
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    The financial planning journey: a grounded theory towards bias mitigation
    (2023) Jugnandan, Shreeya; Willows, Gizelle
    Behavioural finance suggests that individuals behave in a less than optimal manner. The decision-making of investors is subject to behavioural biases, which represent systematic deviations from logic and rationality. Research at the intersection of behavioural finance and financial planning has the potential to significantly improve the welfare of individuals through enhanced decision-making. This thesis explores the potential that financial advice may have toward debiasing investors. Debiasing investors has the potential to positively influence investor welfare and improving individuals' financial decisions has the potential to extend its positive effects on a broader scale. For instance, the South African government remains concerned about the growing number of individuals who rely on the state for financial support due to insufficient retirement assets. Improving individuals' decision-making could result in better savings and investment decisions for the individual. This research draws on behavioural finance concepts to systematically develop new theory. This research uses a constructivist, grounded theory approach. In-depth interviews were undertaken with 12 qualified financial planners in South Africa (of whom two formed part of a pilot study). Financial planners have the capacity to detect bias and deviations from logic within their clients. Financial planners seek to correct these deviations from logic through a two-phase approach entailing both pervasive and tailored techniques for their clients' scenarios. Ultimately, the efficacy of debiasing techniques must be contextualised within the broader financial planning process. The substantive grounded theory this research explicates discusses the debiasing process that individuals might undergo when they seek financial advice. The grounded theory produced by this research, “The Theory of the Financial Planning Journey”, articulates how the relationship between the investor and the financial advisor, underpinned by trust, functions to create an environment that is conducive to debiasing. The process of building and establishing a relationship during the financial planning journey enables the financial advisor to deploy techniques to help mitigate threats, such as biases, to the journey. The more partial a client is to the advisor, the greater the efficacy of the debiasing techniques the advisor may use (such as education or probing questions). This theory contextualises debiasing strategies as a toolkit of techniques to be implemented by the financial advisor. The use of each strategy changes depending on the bias and type of client presented. Although research about behavioural biases and debiasing methods is well documented within finance literature, this research represents a unique academic contribution in multiple ways. First, it approaches a behavioural finance problem with a qualitative, constructivist methodology that is uncommon within the research paradigm. Second, it extends the literature about financial planners by providing a novel, theoretical contribution regarding the role that planners might play in supporting bias mitigation of their clients. There are limited endeavours in behavioural finance literature that systematically seek to develop new theory. Debiasing literature is largely focused on testing debiasing strategies in isolation. This grounded theory suggests how multiple debiasing techniques may work within the process of financial advice. Third, this research identifies specific policy recommendations to improve investor welfare in the future. From a practical perspective, The Theory of the Financial Planning Journey has the propensity to influence the practice of financial advice. This research highlights the importance of relationship-building between advisor and client. Recommendations to policymakers therefore include elevating the importance of social skills when considering what core competencies are required for an individual to qualify as a certified financial planner.