An analysis into the hedging effectiveness and efficiency of the share index futures market in South Africa

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dc.contributor.advisorPage, Mikeen_ZA
dc.contributor.authorLevett, Peteren_ZA
dc.date.accessioned2016-02-29T12:02:33Z
dc.date.available2016-02-29T12:02:33Z
dc.date.issued1992en_ZA
dc.descriptionBibliography: pages 209-219.en_ZA
dc.description.abstractThere has been much written on the ability of futures to reduce risk thereby hedging against potential market declines. However, the effect on return has been largely overlooked. This study investigates the risk and return effectiveness of hedging and hedging strategies using share index futures (SIF) market in South Africa. The empirical analysis is based on actual market data applied in terms of the most prominent hedging strategies, namely the traditional, minimum-variance, beta and Howard & D'Antonio (H&D) strategies. As hedging effectiveness is dependent on market efficiency, an analysis of the pricing efficiency of the South African market is performed with reference to the cost-of-carry valuation model and arbitrage pricing techniques. The results overwhelmingly indicate that the minimum-variance hedge strategy is the most optimal of the four strategies in terms of both risk and return. The beta hedge performed badly in terms of both risk and return (even worse than the naive traditional hedge strategy) and often led to overhedging. The beta strategy is not considered appropriate as an estimate of the minimum-variance hedge ratio in the South African situation because the futures price fluctuates significantly more than the spot index resulting in overstated hedge ratios.en_ZA
dc.identifier.apacitationLevett, P. (1992). <i>An analysis into the hedging effectiveness and efficiency of the share index futures market in South Africa</i>. (Thesis). University of Cape Town ,Faculty of Commerce ,College of Accounting. Retrieved from http://hdl.handle.net/11427/17344en_ZA
dc.identifier.chicagocitationLevett, Peter. <i>"An analysis into the hedging effectiveness and efficiency of the share index futures market in South Africa."</i> Thesis., University of Cape Town ,Faculty of Commerce ,College of Accounting, 1992. http://hdl.handle.net/11427/17344en_ZA
dc.identifier.citationLevett, P. 1992. An analysis into the hedging effectiveness and efficiency of the share index futures market in South Africa. University of Cape Town.en_ZA
dc.identifier.ris TY - Thesis / Dissertation AU - Levett, Peter AB - There has been much written on the ability of futures to reduce risk thereby hedging against potential market declines. However, the effect on return has been largely overlooked. This study investigates the risk and return effectiveness of hedging and hedging strategies using share index futures (SIF) market in South Africa. The empirical analysis is based on actual market data applied in terms of the most prominent hedging strategies, namely the traditional, minimum-variance, beta and Howard & D'Antonio (H&D) strategies. As hedging effectiveness is dependent on market efficiency, an analysis of the pricing efficiency of the South African market is performed with reference to the cost-of-carry valuation model and arbitrage pricing techniques. The results overwhelmingly indicate that the minimum-variance hedge strategy is the most optimal of the four strategies in terms of both risk and return. The beta hedge performed badly in terms of both risk and return (even worse than the naive traditional hedge strategy) and often led to overhedging. The beta strategy is not considered appropriate as an estimate of the minimum-variance hedge ratio in the South African situation because the futures price fluctuates significantly more than the spot index resulting in overstated hedge ratios. DA - 1992 DB - OpenUCT DP - University of Cape Town LK - https://open.uct.ac.za PB - University of Cape Town PY - 1992 T1 - An analysis into the hedging effectiveness and efficiency of the share index futures market in South Africa TI - An analysis into the hedging effectiveness and efficiency of the share index futures market in South Africa UR - http://hdl.handle.net/11427/17344 ER - en_ZA
dc.identifier.urihttp://hdl.handle.net/11427/17344
dc.identifier.vancouvercitationLevett P. An analysis into the hedging effectiveness and efficiency of the share index futures market in South Africa. [Thesis]. University of Cape Town ,Faculty of Commerce ,College of Accounting, 1992 [cited yyyy month dd]. Available from: http://hdl.handle.net/11427/17344en_ZA
dc.language.isoengen_ZA
dc.publisher.departmentCollege of Accountingen_ZA
dc.publisher.facultyFaculty of Commerceen_ZA
dc.publisher.institutionUniversity of Cape Town
dc.subject.otherAccountingen_ZA
dc.titleAn analysis into the hedging effectiveness and efficiency of the share index futures market in South Africaen_ZA
dc.typeMaster Thesis
dc.type.qualificationlevelMasters
dc.type.qualificationnameMComen_ZA
uct.type.filetypeText
uct.type.filetypeImage
uct.type.publicationResearchen_ZA
uct.type.resourceThesisen_ZA
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