FURTHER EVIDENCE OF LONG MEMORY IN THE SOUTH AFRICAN STOCK MARKET

This paper expands and augments the results of the paper by Jefferis and Thupayagale ) and tests the efficiency of the South African stock market with Wavelet and Markov Switching Regime analyses of selected shares and the a ALSI 40 data. The Wavelet analysis indicated that most of the individual share prices and the share index time series are mean reverting over the long run and follow a long memory process, offering evidence against weak-form efficient market hypothesis (EMH). The Markov model modelled the financial and prevalent economic conditions accurately and established the presence of patterns in the historic time series, providing additional support against the weak-form EMH.     

DURATION ANALYSIS IN SOUTH AFRICA: THE SEARCH FOR SUPERIOR MEASURES

The Macaulay duration is a highly successful tool for measuring and managing interest rate risk. However, it employs restrictive assumptions which constrain its usefulness in a rapidly evolving market. The Basel II implementation and ongoing accounting standard reassessments highlight the requirement for accurate, robust risk measures. Contemporary research has focused on augmenting the existing duration definition. We extend this work by relaxing some input assumptions, describing a different duration measure and applying it to interest rate driven price changes and examining the influence on the duration gap. The economic market value of equity (an important metric for regulators and risk management) is significantly improved.