scholarly journals Information Flow Between the Zimbabwe Stock Exchange and the Johannesburg Stock Exchange: A Transfer Entropy Approach

2021 ◽  
Vol 12 (2) ◽  
pp. 353-376
Author(s):  
Kingstone Nyakurukwa
Keyword(s):  
Information Flow ◽  
Stock Exchange ◽  
Tail Dependence ◽  
Point Of View ◽  
Transfer Entropy ◽  
Significant Information ◽  
Fund Managers ◽  
Johannesburg Stock Exchange ◽  
Entropy Estimate ◽  
Effective Transfer

The purpose of this paper is to determine whether there was information flow between the stock markets of Zimbabwe and South Africa during the time the Zimbabwean economy was dollarized. The author used econophysics-based Shannonian and Rényian transfer entropy estimates to establish the flow of information between the markets in tranquil periods as well as at the tails of return distributions. The only significant Shannonian transfer entropy estimate was from Johannesburg Stock Exchange (JSE) resources index to Zimbabwe Stock Exchange (ZSE) mining index. The findings show that the only significant tail dependence was between JSE All Share Index (JALSH) and ZSE Mining on the one hand, and between JSE Resources and ZSE Mining on the other hand. However, the magnitudes of the effective transfer entropy values are relatively low, showing that there are weak linkages between the Zimbabwe Stock Exchange and the Johannesburg Stock Exchange. The lack of significant information flows between the exchanges of the two countries offer opportunities to fund managers for portfolio diversification. From a government point of view, it is imperative that the tempo of economic and political reform be accelerated so that integration between the markets can be fast-tracked. Integrated markets will benefit Zimbabwe as this will reduce the cost of equity and accelerate economic growth.

scholarly journals Die Johannesburgse Effektebeurs as rasionele kapitaalmark

1981 ◽  
Vol 12 (3) ◽  
pp. 53-59 ◽  
Author(s):  
Leon M. Brummer ◽  
Pieter J. Jacobs
Keyword(s):  
Stock Exchange ◽  
Weak Form ◽  
Efficient Market Hypothesis ◽  
Small Degree ◽  
Point Of View ◽  
Efficient Market ◽  
Price Changes ◽  
Economic Point ◽  
Johannesburg Stock Exchange ◽  
Measure Of Dependence

The Johannesburg Stock Exchange as an efficient market. Finality has not yet been reached on the question whether the Johannesburg Stock Exchange complies with the requirements of the efficient market hypothesis. The results of the research that are published in this article is therefore an attempt to make a contribution to the debate regarding the Johannesburg Stock Exchange as an efficient market. By way of serial correlations as well as runs tests an investigation was carried out into the behaviour of the prices of 94 quoted shares for the period 1970 to 1977. The results of the study give rise to the conclusion that the Johannesburg Stock Exchange does not statistically comply with the weak form of the efficient market hypothesis (the random walk hypothesis), as a measure of dependence between successive price changes was found. Seen from an economic point of view it is, however, doubtful whether investors could use this small degree of dependence between price changes to gain higher returns on share investments.Uitsluitsel met betrekking tot die mate waartoe die Johannesburgse Effektebeurs aan die vereistes vir 'n rasionele mark voldoen, is nog nie verkry nie. Die resultate wat in hierdie artikel voorkom is daarom 'n poging om 'n bydrae in die debat rakende die Johannesburgse Effektebeurs as 'n rasionele mark, te maak. 'n Ondersoek na die markpryse van 94 genoteerde aandele vir die periode 1970-77 is deur middel van reekskorrelasiekoeffisiente en die lopietoets uitgevoer. Die resultate van die studie gee aanleiding tot die gevolgtrekking dat die Johannesburgse Effektebeurs nie statisties aan die swak vorm van die rasionele markhipotese (die willekeurige beweging van markpryse) voldoen nie, aangesien 'n mate van afhanklikheid tussen opeenvolgende prysveranderings gevind is. Uit 'n ekonomiese oogpunt gesien is dit egter twyfelagtig of beleggers hierdie afhanklikheid sal kan aanwend om hoer opbrengste op aandelebeleggings te bewerkstellig.

scholarly journals Quantifying the Information Flow between Ghana Stock Market Index and Its Constituents Using Transfer Entropy

2020 ◽  
Vol 2020 ◽  
pp. 1-10
Author(s):  
Prince Mensah Osei ◽  
Anokye M. Adam
Keyword(s):  
Stock Market ◽  
Information Flow ◽  
Information Exchange ◽  
Oil And Gas ◽  
Transfer Entropy ◽  
Stock Market Index ◽  
Insurance Sector ◽  
Market Index ◽  
The Individual ◽  
Effective Transfer

We quantify the strength and the directionality of information transfer between the Ghana stock market index and its component stocks as well as observe the same among the individual stocks on the market using transfer entropy. The information flow between the market index and its components and among individual stocks is measured by the effective transfer entropy of the daily logarithm returns generated from the daily market index and stock prices of 32 stocks ranging from 2nd January 2009 to 16th February 2018. We find a bidirectional and unidirectional flow of information between the GSE index and its component stocks, and the stocks dominate the information exchange. Among the individual stocks, SCB is the most active stock in the information exchange as it is the stock that receives the highest amount of information, but the most informative source is EGL (an insurance company) that has the highest net information outflow while the most information sink is PBC that has the highest net information inflow. We further categorize the stocks into 9 stock market sectors and find the insurance sector to be the largest source of information which confirms our earlier findings. Surprisingly, the oil and gas sector is the information sink. Our results confirm the fact that other sectors including oil and gas mitigate their risk exposures through insurance companies and are always expectant of information originating from the insurance sector in relation to regulatory compliance issues. It is our firm conviction that this study would allow stakeholders of the market to make informed buy, sell, or hold decisions.

scholarly journals Integrating ESG factors in investment decisions by mutual fund managers: a case of selected Johannesburg Stock Exchange-listed companies

2020 ◽  
Vol 17 (4) ◽  
pp. 258-270
Author(s):  
Michael Bamidele Fakoya ◽  
Segopotje Evonia Malatji
Keyword(s):  
Mutual Fund ◽  
Stock Exchange ◽  
Panel Data Analysis ◽  
Listed Companies ◽  
Business Practices ◽  
Mutual Fund Managers ◽  
Responsible Investment ◽  
Fund Managers ◽  
Johannesburg Stock Exchange ◽  
Asset Managers

This paper examines whether mutual fund managers incorporate environmental, social, and governance (ESG) factors when deciding which sector to invest on behalf of their trustees. In doing this, the top 20 South African mutual fund companies (asset managers) listed on the Johannesburg Stock Exchange (JSE) were selected. The paper identified the top 30 JSE listed companies (in the large industrial, equipment, and machinery sectors, excluding unlisted and service-oriented companies) where trustees’ funds were invested (with a total of 28 companies between 2007 and 2017) from the mutual fund companies’ Equity Fund Fact Sheets 2017 (representing recent investment focus). ESG data were collected from the integrated and sustainability reports at the sampled companies’ websites, and financial data were sourced from the IRESS database. This study adopted the panel data analysis. The results show an insignificant negative relationship between the ESG proxies (water usage, employee health and safety cost [number of work-related fatalities], percentage of women on corporate board) and return on equity (ROE). This means that the sampled companies disregard the United Nations Principle of Responsible Investment (UN PRI) guideline, suggesting that asset managers focus on increasing returns on shareholders’ investment without considering ESG issues. The paper concludes that the disregard for responsible investment guidelines does not encourage companies to improve their unsustainable business practices.

scholarly journals RTransferEntropy — Quantifying information flow between different time series using effective transfer entropy

SoftwareX ◽  
2019 ◽  
Vol 10 ◽  
pp. 100265 ◽  
Author(s):  
Simon Behrendt ◽  
Thomas Dimpfl ◽  
Franziska J. Peter ◽  
David J. Zimmermann
Keyword(s):  
Time Series ◽  
Information Flow ◽  
Transfer Entropy ◽  
Effective Transfer

scholarly journals Information Flow Analysis between EPU and Other Financial Time Series

Entropy ◽  
2020 ◽  
Vol 22 (6) ◽  
pp. 683
Author(s):  
Can-Zhong Yao
Keyword(s):  
Economic Policy ◽  
Exchange Rate ◽  
Information Flow ◽  
Bilateral Trade ◽  
Financial Time Series ◽  
Flow Analysis ◽  
Transfer Entropy ◽  
Policy Uncertainty ◽  
Novel Concept ◽  
Effective Transfer

We investigate the strength and direction of information flow among economic policy uncertainty (EPU), US imports and exports to China, and the CNY/US exchange rate by using the novel concept of effective transfer entropy (ETE) with a sliding window methodology. We verify that this new method can capture dynamic orders effectively by validating them with the linear transfer entropy (TE) and Granger causality methods. Analysis shows that since 2016, US economic policy has contributed substantially to China-US bilateral trade and that China is making passive adjustments based on this trade volume. Unlike trade market conditions, China’s economic policy has significantly influenced the exchange rate fluctuation since 2016, which has, in turn, affected US economic policy.

scholarly journals Information Flow between Global Equities and Cryptocurrencies: A VMD-Based Entropy Evaluating Shocks from COVID-19 Pandemic

Complexity ◽  
2021 ◽  
Vol 2021 ◽  
pp. 1-25
Author(s):  
Emmanuel Asafo-Adjei ◽  
Peterson Owusu Junior ◽  
Anokye M. Adam
Keyword(s):  
Financial Markets ◽  
Information Flow ◽  
Sample Period ◽  
Significant Information ◽  
Full Sample ◽  
Mode Decomposition ◽  
The World ◽  
The One ◽  
Effective Transfer ◽  
Digital Assets

The world has witnessed the adverse impact of the COVID-19 pandemic. Accordingly, it is expected that information transmission between equities and digital assets has been altered due to the hostile impact of the pandemic outbreak on financial markets. As a result, the ensuing perverse risk among markets is presumed to rise during severe uncertainties occasioned by the COVID-19 pandemic. The impetus of this study is to examine the degree of asymmetry and nonlinear directional causality between global equities and cryptocurrencies in the frequency domain. Hence, we employ both the variational mode decomposition (VMD) and the Rényi effective transfer entropy techniques. Analyses of the study are presented for three sample periods; these are the full sample period, the pre-COVID-19 period, and the COVID-19 pandemic period. We gauge a mixture of asymmetric and nonlinear bidirectional and unidirectional causality between global equities and cryptocurrencies for the sample periods. However, the COVID-19 pandemic period appears to be driving the estimates for the full sample period, which indicates a negative flow. Thus, the direction and significance of the information flow between the markets for the full sample correspond to the one observed during the COVID-19 pandemic period. We, consequently, establish a significant directional, dynamical, and scale-dependent information flow between global equities and cryptocurrencies. Notwithstanding, throughout the study samples, we mainly find a negative significant information flow from global equities to cryptocurrencies. We detect that most cryptocurrencies exhibit similar behaviour of information flow to global equities for each of the sample periods. The outcome provides pertinent signals to investors with diverse investment horizons who would want to diversify, hedge, or employ cryptocurrencies as a safe haven for global equities during uncertainties, specifically the COVID-19 pandemic.

scholarly journals A New EEMD-Effective Transfer Entropy-Based Methodology for Exchange Rate Market Information Transmission in Southern Africa Development Community

Complexity ◽  
2021 ◽  
Vol 2021 ◽  
pp. 1-22
Author(s):  
Anokye M. Adam ◽  
Emmanuel N. Gyamfi ◽  
Kwabena A. Kyei ◽  
Simiso Moyo ◽  
Ryan S. Gill
Keyword(s):  
Exchange Rates ◽  
Information Flow ◽  
Monetary Union ◽  
Ensemble Empirical Mode Decomposition ◽  
Transfer Entropy ◽  
Economic Policies ◽  
Monetary Unions ◽  
Low Frequencies ◽  
Southern Africa Development Community ◽  
Effective Transfer

The desire to form monetary unions among regional blocs in Africa has necessitated the need to assess the degree of financial systems interdependencies in Africa economic blocs for their suitability to have harmonised economic policies of eventual monetary unions. In this regard, SADC has pursued policies to harmonise and integrate its financial system as a precursor to its intended monetary union. However, the ensuing risk among exchange rates of economies in SADC is presumed to rise during severe uncertainties. This study examines the degree of asymmetry and nonlinear directional causality between exchange rates in SADC in the frequency domain. We employ both the ensemble empirical mode decomposition (EEMD) and the Rényi effective transfer entropy techniques to investigate the multiscale information that might be disregarded and further quantify the directional flow of information. Analysis of the study is presented for four frequency-domains: high-, medium-, and low frequencies, representing short-, medium-, and long-terms, respectively, in addition to the residue (fundamental feature). We find a mixture of asymmetric and nonlinear bidirectional and unidirectional causality between exchange rates in SADC for the sampled period. The study reveals a significant positive information flow in the high frequency, but negative flow in the medium and low frequencies. In addition, we gauge a bidirectional significant negative information flow within all the 15 economies for the residue. This suggests a higher risk of uncertainties in exchange rates of SADC. Our findings for low probability events at multiscales have implications for the direction of the future of the SADC monetary union. This calls for further sustained policy harmonisation in the region.

scholarly journals Are South African equity investors rewarded for taking on more risk?

2019 ◽  
Vol 12 (1) ◽  
Author(s):  
Johannes P. Steyn ◽  
Lomari Theart
Keyword(s):  
South African ◽  
Stock Exchange ◽  
Negative Relationship ◽  
Time Frame ◽  
Sampling Procedure ◽  
Low Risk ◽  
Fund Managers ◽  
Johannesburg Stock Exchange ◽  
Increased Risk ◽  
Managerial Implications

Orientation: It is rational for investors to expect additional compensation for an increased risk exposure. This positive risk–return relationship is in line with traditional financial theory; however, this relationship does not always hold in empirical research.Research purpose: The aim of this article was to investigate the prevalence of the low-risk anomaly in the South African equity market.Motivation for the study: If there is evidence of a low-risk anomaly, where low-risk shares outperform high-risk shares, then the additional return expectation of investors may be misplaced.Research design/approach and method: A unique sampling procedure and an extended time frame were employed in a quintile portfolio analysis methodology.Main findings: The article presents evidence that South African listed shares with low historical volatility earned higher risk-adjusted returns over the period July 2004 to September 2018. Low-volatility shares delivered a Sharpe ratio of 1.10 compared to 0.65 produced by the Financial Times Stock Exchange / Johannesburg Stock Exchange Shareholder Weighted Index over the same period.Practical/managerial implications: The assumption that return in an investment portfolio could be enhanced by taking on more risk could be wrong. It seems that fund managers could potentially enhance returns and decrease risk in their portfolios by focussing on shares with low historical volatility.Contribution/value-add: The negative relationship observed between volatility and return is inconsistent with theoretical expectations. Therefore, the results of this article suggest that investors are not rewarded for assuming higher levels of risk.

scholarly journals The relative information content of audited and unaudited financial data releases

1987 ◽  
Vol 18 (2) ◽  
pp. 61-64 ◽  
Author(s):  
R. F. Knight ◽  
J. F. Affleck-Graves
Keyword(s):  
Information Content ◽  
Preliminary Report ◽  
Annual Report ◽  
Stock Exchange ◽  
Financial Data ◽  
Significant Information ◽  
Johannesburg Stock Exchange ◽  
Relative Information ◽  
Incremental Information ◽  
Relative Information Content

This article reports the results of a study which empirically investigates the relative information content of the three statutory reports required in terms of the Companies Act (1973) (viz. the interim report, the preliminary report and the annual report) in the context of the Johannesburg Stock Exchange. The relative information content of audited and unaudited data releases was likewise evaluated in this setting. The results presented indicate that the three statutory reports referred to each have significant information content although the PR appears to have a significantly larger information content than the others. Surprisingly, audited data do not appear to have a significantly different information content than unaudited data. A possible explanation which is tentatively offered is that audited data releases tend to be far less timely than unaudited data releases and this feature may result in a decaying of the former's incremental information content, if indeed any exists.

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