Volatility spillover between Exchange-Traded Funds on the Johannesburg Stock Exchange

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dc.contributor.advisorSayed, Ayesha
dc.contributor.authorStarr, Caleb
dc.date.accessioned2025-09-25T07:54:38Z
dc.date.available2025-09-25T07:54:38Z
dc.date.issued2025
dc.date.updated2025-09-25T07:48:56Z
dc.description.abstractGrowth in the Exchange-Traded Fund industry (ETF) has been exponential in the past decade. International research on this topic has been extensive, with less focus given to the local Johannesburg Stock Exchange (JSE). This research aims to extend the existing literature on the JSE, particularly focusing on the volatility spillover between domestic ETFs representing four major asset classes and four equity ETFs using the Diebold and Yilmaz (2012) Spillover Index. The equity ETF system includes the Satrix RESI 10 (STXRES), Satrix FINI 15 (STXFIN), and Satrix Capped INDI (STXIND). Four ETFs are selected as proxies for equities, bonds, commodities, and property. The ETFs representing the asset classes are the Satrix 40 (STX40), Satrix GOVI (STXGVI), ABSA NewGOLD (GLD), and 1Invest SA Property (ETFSAP), respectively. These two volatility systems are examined independently. The results show that the STX40 ETF is a net volatility transmitter in the alternate asset ETF system. Within the equity ETF system, the STXFIN and STXRES are net volatility receivers, and the STXIND fluctuates between receiver and transmitter of volatility over the period analysed. In the alternate asset system, ETFSAP and STXGVI are net volatility receivers, with the GLD ETF oscillating between being both a net receiver and transmitter. Furthermore, the Chicago Board Options Exchange Volatility Index (VIX) index is used to proxy foreign volatility shocks to South African financial assets. Approximately 12,5% of volatility for the full set of ETFs can be attributed to the VIX. Additionally, a regression analysis is employed to evaluate the VIX as a significant explanatory variable for measuring volatility propagation through the chosen ETFs, with the results confirming its significance solely in the equity ETF system. This study adds to the existing literature on portfolio allocation decisions by focusing on sector rotation and asset allocation strategies. Additionally, it provides insights into the diversification opportunities that JSE investors can benefit from using ETFs. The study includes periods of financial market volatility, driven by significant macroeconomic events, such as Britain's referendum vote on European Union participation, the COVID-19 pandemic, and the conflict between Russia and Ukraine
dc.identifier.apacitationStarr, C. (2025). <i>Volatility spillover between Exchange-Traded Funds on the Johannesburg Stock Exchange</i>. (). Universiy of Cape Town ,Faculty of Commerce ,Department of Finance and Tax. Retrieved from http://hdl.handle.net/11427/41912en_ZA
dc.identifier.chicagocitationStarr, Caleb. <i>"Volatility spillover between Exchange-Traded Funds on the Johannesburg Stock Exchange."</i> ., Universiy of Cape Town ,Faculty of Commerce ,Department of Finance and Tax, 2025. http://hdl.handle.net/11427/41912en_ZA
dc.identifier.citationStarr, C. 2025. Volatility spillover between Exchange-Traded Funds on the Johannesburg Stock Exchange. . Universiy of Cape Town ,Faculty of Commerce ,Department of Finance and Tax. http://hdl.handle.net/11427/41912en_ZA
dc.identifier.ris TY - Thesis / Dissertation AU - Starr, Caleb AB - Growth in the Exchange-Traded Fund industry (ETF) has been exponential in the past decade. International research on this topic has been extensive, with less focus given to the local Johannesburg Stock Exchange (JSE). This research aims to extend the existing literature on the JSE, particularly focusing on the volatility spillover between domestic ETFs representing four major asset classes and four equity ETFs using the Diebold and Yilmaz (2012) Spillover Index. The equity ETF system includes the Satrix RESI 10 (STXRES), Satrix FINI 15 (STXFIN), and Satrix Capped INDI (STXIND). Four ETFs are selected as proxies for equities, bonds, commodities, and property. The ETFs representing the asset classes are the Satrix 40 (STX40), Satrix GOVI (STXGVI), ABSA NewGOLD (GLD), and 1Invest SA Property (ETFSAP), respectively. These two volatility systems are examined independently. The results show that the STX40 ETF is a net volatility transmitter in the alternate asset ETF system. Within the equity ETF system, the STXFIN and STXRES are net volatility receivers, and the STXIND fluctuates between receiver and transmitter of volatility over the period analysed. In the alternate asset system, ETFSAP and STXGVI are net volatility receivers, with the GLD ETF oscillating between being both a net receiver and transmitter. Furthermore, the Chicago Board Options Exchange Volatility Index (VIX) index is used to proxy foreign volatility shocks to South African financial assets. Approximately 12,5% of volatility for the full set of ETFs can be attributed to the VIX. Additionally, a regression analysis is employed to evaluate the VIX as a significant explanatory variable for measuring volatility propagation through the chosen ETFs, with the results confirming its significance solely in the equity ETF system. This study adds to the existing literature on portfolio allocation decisions by focusing on sector rotation and asset allocation strategies. Additionally, it provides insights into the diversification opportunities that JSE investors can benefit from using ETFs. The study includes periods of financial market volatility, driven by significant macroeconomic events, such as Britain's referendum vote on European Union participation, the COVID-19 pandemic, and the conflict between Russia and Ukraine DA - 2025 DB - OpenUCT DP - University of Cape Town KW - Volatility Spillover KW - ETF KW - JSE KW - Asset Allocation KW - Diversification KW - VIX LK - https://open.uct.ac.za PB - Universiy of Cape Town PY - 2025 T1 - Volatility spillover between Exchange-Traded Funds on the Johannesburg Stock Exchange TI - Volatility spillover between Exchange-Traded Funds on the Johannesburg Stock Exchange UR - http://hdl.handle.net/11427/41912 ER - en_ZA
dc.identifier.urihttp://hdl.handle.net/11427/41912
dc.identifier.vancouvercitationStarr C. Volatility spillover between Exchange-Traded Funds on the Johannesburg Stock Exchange. []. Universiy of Cape Town ,Faculty of Commerce ,Department of Finance and Tax, 2025 [cited yyyy month dd]. Available from: http://hdl.handle.net/11427/41912en_ZA
dc.language.isoen
dc.language.rfc3066eng
dc.publisher.departmentDepartment of Finance and Tax
dc.publisher.facultyFaculty of Commerce
dc.publisher.institutionUniversiy of Cape Town
dc.subjectVolatility Spillover
dc.subjectETF
dc.subjectJSE
dc.subjectAsset Allocation
dc.subjectDiversification
dc.subjectVIX
dc.titleVolatility spillover between Exchange-Traded Funds on the Johannesburg Stock Exchange
dc.typeThesis / Dissertation
dc.type.qualificationlevelMasters
dc.type.qualificationlevelMCom
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