Monetary policy and the stock market in South Africa: how do South African equity prices respond to expected and unexpected changes in the repo rate?

 

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dc.contributor.advisor Ndlovu, Godfrey
dc.contributor.author Ramatlo, Tshegofatso
dc.date.accessioned 2020-02-11T07:43:49Z
dc.date.available 2020-02-11T07:43:49Z
dc.date.issued 2019
dc.identifier.citation Ramatlo, T. 2019. Monetary policy and the stock market in South Africa: how do South African equity prices respond to expected and unexpected changes in the repo rate?. en_ZA
dc.identifier.uri http://hdl.handle.net/11427/30975
dc.description.abstract This analyses the impact of unexpected changes in monetary policy on the South African equity market over the period 2005 -2018. In an attempt to understand this relationship, two main views have emerged. The wealth effect suggests that monetary policy changes have an indirect effect on the stock market, via changes in the value of private portfolios. On the other hand, it has been argued that the stock market is an independent source of macroeconomic volatility to which policy makers may wish to consider. This paper applies an event study approach to examine the stock market reaction to monetary policy. Furthermore, to understand the economic sources underpinning that reaction a Vector autoregressive model is estimated. The results suggest that on average, a surprise rate hike of 100 basis points causes short term JSE All Share index total returns to decline by 2.71%. We also find that the stock market reacts positively (negatively) to expansionary (contractionary) unexpected monetary policy actions due to revised market expectations about future dividends, excess premiums and the discount rate. The findings are crucial for central bank policy makers and JSE stock market investors.
dc.subject Monetary Policy
dc.subject Stock Market
dc.subject Equity Market
dc.subject JSE All Share Index
dc.title Monetary policy and the stock market in South Africa: how do South African equity prices respond to expected and unexpected changes in the repo rate?
dc.type Master Thesis
dc.date.updated 2020-01-28T11:09:35Z
dc.language.rfc3066 eng
dc.publisher.faculty Faculty of Commerce
dc.publisher.department School of Economics
dc.type.qualificationlevel Masters
dc.type.qualificationname MCom
dc.identifier.apacitation Ramatlo, T. (2019). <i>Monetary policy and the stock market in South Africa: how do South African equity prices respond to expected and unexpected changes in the repo rate?</i>. (). ,Faculty of Commerce ,School of Economics. Retrieved from http://hdl.handle.net/11427/30975 en_ZA
dc.identifier.chicagocitation Ramatlo, Tshegofatso. <i>"Monetary policy and the stock market in South Africa: how do South African equity prices respond to expected and unexpected changes in the repo rate?."</i> ., ,Faculty of Commerce ,School of Economics, 2019. http://hdl.handle.net/11427/30975 en_ZA
dc.identifier.vancouvercitation Ramatlo T. Monetary policy and the stock market in South Africa: how do South African equity prices respond to expected and unexpected changes in the repo rate?. []. ,Faculty of Commerce ,School of Economics, 2019 [cited yyyy month dd]. Available from: http://hdl.handle.net/11427/30975 en_ZA
dc.identifier.ris TY - Thesis / Dissertation AU - Ramatlo, Tshegofatso AB - This analyses the impact of unexpected changes in monetary policy on the South African equity market over the period 2005 -2018. In an attempt to understand this relationship, two main views have emerged. The wealth effect suggests that monetary policy changes have an indirect effect on the stock market, via changes in the value of private portfolios. On the other hand, it has been argued that the stock market is an independent source of macroeconomic volatility to which policy makers may wish to consider. This paper applies an event study approach to examine the stock market reaction to monetary policy. Furthermore, to understand the economic sources underpinning that reaction a Vector autoregressive model is estimated. The results suggest that on average, a surprise rate hike of 100 basis points causes short term JSE All Share index total returns to decline by 2.71%. We also find that the stock market reacts positively (negatively) to expansionary (contractionary) unexpected monetary policy actions due to revised market expectations about future dividends, excess premiums and the discount rate. The findings are crucial for central bank policy makers and JSE stock market investors. DA - 2019 DB - OpenUCT DP - University of Cape Town KW - Monetary Policy KW - Stock Market KW - Equity Market KW - JSE All Share Index LK - https://open.uct.ac.za PY - 2019 T1 - Monetary policy and the stock market in South Africa: how do South African equity prices respond to expected and unexpected changes in the repo rate? TI - Monetary policy and the stock market in South Africa: how do South African equity prices respond to expected and unexpected changes in the repo rate? UR - http://hdl.handle.net/11427/30975 ER - en_ZA


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