The impact of firm-specific factors on the cross- sectional variation in Johannesburg security exchange listed equity returns
Doctoral Thesis
2014
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University of Cape Town
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Abstract
The aim of this study is to examine the impact of technical and fundamental (referred to as firm-specific) factors on the cross-sectional variation in equity returns on the Johannesburg Securities Exchange (JSE). Three approaches to address this objective were identified through an extensive literature study covering more than half a century’s research, namely a cross-sectional regression approach, a factor portfolio approach and an extreme performer approach. All three approaches are applied in this study, allowing for comparison and robustness- tests to be performed on the JSE for the first time. In addition to factors identified through the literature review, factors that make economic sense from a South African point of view have also been included in the dataset, resulting in a total of fifty firm-specific factors to be examined. A fresh data set was created by collecting monthly data through numerous data sources on all shares listed on the JSE for the period January 1994 through May 2011, for these factors. The seventeen and a half year period is the longest period used to date (to the author’s knowledge) for the kind of research conducted in this thesis. Furthermore, the data has been prepared to correct for potential statistical biases that may affect the results, including data snooping, infrequent trading, survivorship bias, look-ahead bias and outliers. This lengthy period further allows for the formation of two independent subsamples, each covering a full investment cycle, enabling in- and out of- sample empirical research and testing to be conducted on the JSE for the first time.
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Includes bibliographical references.
Reference:
Van Heerden, J. 2014. The impact of firm-specific factors on the cross- sectional variation in Johannesburg security exchange listed equity returns. University of Cape Town.