The covariation of South African and foreign equity returns during bull and bear runs : implications for portfolio diversification

Mhlanga, Godfrey (2008) The covariation of South African and foreign equity returns during bull and bear runs : implications for portfolio diversification. Masters thesis, Rhodes University.

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Abstract

This study examines the pattern of covariation of the industrial index returns of South Africa and foreign industrial sectors. This follows recent increase in national equity correlations and increases in the influence of industry effects in portfolio diversification. The covariation pattern in returns across industries and countries during both bull and bear runs is examined using correlation analysis to determine if there is a difference between the two epochs. The study presents preliminary evidence of the covariation between sectors during a bear and a bull run. Return covariation among sectors is impelled to a greater extent by country-specific factors than by industry-specific factors, implying the segmentation of industrial sectors. Thus, South African investors can in general gain more if a portfolio comprising shares across industries and countries is held, even if these investors buy shares from similar industries.

Item Type:Thesis (Masters)
Uncontrolled Keywords:Stock exchanges, South Africa, Portfolio management, Investments
Subjects:H Social Sciences > HB Economic Theory
Divisions:Faculty > Faculty of Commerce > Economics and Economic History
ID Code:2646
Deposited By: Ms Chantel Clack
Deposited On:19 Apr 2012 12:30
Last Modified:19 Apr 2012 12:30
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