scholarly journals Modeling System Risk in the South African Insurance sector: A Dynamic Mixture Copula Approach

2021 ◽  
Author(s):  
John Weirstrass Muteba Mwamba ◽  
Serge Esef Angaman
Keyword(s):  
South African ◽  
Systemic Risk ◽  
Stock Exchange ◽  
Nonlinear Dependence ◽  
Time Varying ◽  
The South ◽  
Insurance Sector ◽  
Capture Time ◽  
Marginal Expected Shortfall ◽  
The Individual

In this study, a dynamic mixture copula is used to estimate the marginal expected shortfall in the South African insurance sector. While other studies assumed nonlinear dependence to be static over time, our model capture time-varying nonlinear dependence between institutions and the market. In order to capture time-varying nonlinear dependence, the generalized autoregressive score (GAS) is used to model the dynamic copula parameters. Furthermore, our study implements a ranking that expresses to what degree individual insurers are systemically important in South Africa. We use daily stock return of five South African insurers listed in the Johannesburg Stock Exchange (JSE) from November 13, 2007 to June 15, 2020. We find that Sanlam and Discovery contribute the most to systemic risk, while Santam is found to be the least contributor to the overall systemic risk in the South African insurance sector. Our findings would be of paramount importance for the South African regulators as they would be informed that not only banks are systemically important, but some insurers also are systemically important financial institutions. Hence, stricter regulation of these institutions in the form of higher capital and loss absorbency requirements could be required based on the individual business activities undertaken by the company.

scholarly journals Modeling System Risk in the South African Insurance Sector: A Dynamic Mixture Copula Approach

2021 ◽  
Vol 9 (2) ◽  
pp. 29
Author(s):  
John Weirstrass Muteba Mwamba ◽  
Ehounou Serge Eloge Florentin Angaman
Keyword(s):  
South Africa ◽  
South African ◽  
Stock Exchange ◽  
Common Belief ◽  
Insurance Company ◽  
The South ◽  
Stock Market Returns ◽  
Insurance Sector ◽  
Asymmetric Dependence ◽  
Marginal Expected Shortfall

In this paper, a dynamic mixture copula model is used to estimate the marginal expected shortfall in the South African insurance sector. We also employ the generalized autoregressive score model (GAS) to capture the dynamic asymmetric dependence between the insurers’ returns and the stock market returns. Furthermore, the paper implements a ranking framework that expresses to what extent individual insurers are systemically important in the South African economy. We use the daily stock return of five South African insurers listed on the Johannesburg Stock Exchange from November 2007 to June 2020. We find that Sanlam and Discovery contribute the most to systemic risk, and Santam turns out to be the least systemically risky insurance company in the South African insurance sector. Our findings defy common belief whereby only banks are systemically risky financial institutions in South Africa and should undergo stricter regulatory measures. However, our results indicate that stricter regulations such as higher capital and loss absorbency requirements should be required for systemically risky insurers in South Africa.

scholarly journals The Evolving Efficiency Of The South African Stock Exchange

2012 ◽  
Vol 11 (9) ◽  
pp. 997 ◽  
Author(s):  
Lumengo Bonga-Bonga
Keyword(s):  
Stock Returns ◽  
South African ◽  
Stock Exchange ◽  
Weak Form ◽  
Time Varying ◽  
The South ◽  
Forecast Performance ◽  
Nested Models ◽  
Out Of Sample ◽  
Weak Form Efficiency

This paper tests the weak-form efficiency in the South African stock exchange - the Johannesburg Securities Exchange (JSE) - under the hypothesis that emerging markets efficiency evolves through time as these markets constantly enhance their regulatory environment. The paper makes use of the time varying GARCH model in testing this hypothesis. In addition, the paper compares the out-of-sample forecast performance of the time varying and fixed parameter GARCH models in predicting stock returns in the JSE making use of MSE-F statistics for nested models proposed (McCracken, 1999). The findings of the paper show that the two models provide the same conclusion in showing that the JSE has been efficient during the period of the analysis. In addition, the time varying model outperforms the fixed coefficient model in predicting the JSE stock returns. This finding indicates that the time-varying parameter model adds a benefit in testing the weak-form efficiency or modelling stock return in the JSE.

scholarly journals The Assessment Of Market Risk Premium In South Africa

2010 ◽  
Vol 26 (6) ◽  
Author(s):  
Lumengo Bonga-Bonga
Keyword(s):  
South Africa ◽  
Stock Market ◽  
Stock Returns ◽  
South African ◽  
Risk Premium ◽  
Stock Exchange ◽  
Time Varying ◽  
The South ◽  
Stock Market Returns ◽  
Premium Model

<p class="MsoNormal" style="text-indent: 0in; margin: 0in 0.5in 0pt; mso-pagination: none;"><span style="font-family: &quot;Times New Roman&quot;,&quot;serif&quot;; font-size: 10pt;" lang="EN-GB">This paper makes use of time-varying parameter GARCH-M model to estimate the risk aversion parameter for the South African stock market. The paper further compares the forecasts performance of a time-varying risk premium model with that of a constant risk premium model in predicting stock market returns on the South African stock exchange. The findings of the paper show that risk premium is time varying and indicate that stock market in South Africa is vulnerable to external shocks. Moreover, the paper finds that the time-varying GARCH-M model outperforms the fixed parameter GARCH-M model in predicting stock returns when short-term forecast horizons are used. </span></p>

scholarly journals Measuring the systemic risk in the South African banking sector

2017 ◽  
Vol 20 (1) ◽  
Author(s):  
Gregory M. Foggitt ◽  
Andre Heymans ◽  
Gary W. Van Vuuren ◽  
Anmar Pretorius
Keyword(s):  
Financial Crisis ◽  
South African ◽  
Systemic Risk ◽  
Banking Sector ◽  
Risk Index ◽  
Financial Sector ◽  
Ethical Behaviour ◽  
The South ◽  
Case Scenario ◽  
Worst Case

Background: In the aftermath of the sub-prime crisis, systemic risk has become a greater priority for regulators, with the National Treasury (2011) stating that regulators should proactively monitor changes in systemic risk.Aim: The aim is to quantify systemic risk as the capital shortfall an institution is likely to experience, conditional to the entire financial sector being undercapitalised.Setting: We measure the systemic risk index (SRISK) of the South African (SA) banking sector between 2001 and 2013.Methods: Systemic risk is measured with the SRISK.Results: Although the results indicated only moderate systemic risk in the SA financial sector over this period, there were significant spikes in the levels of systemic risk during periods of financial turmoil in other countries. Especially the stock market crash in 2002 and the subprime crisis in 2008. Based on our results, the largest contributor to systemic risk during quiet periods was Investec, the bank in our sample which had the lowest market capitalisation. However, during periods of financial turmoil, the contributions of other larger banks increased markedly.Conclusion: The implication of these spikes is that systemic risk levels may also be highly dependent on external economic factors, in addition to internal banking characteristics. The results indicate that the economic fundamentals of SA itself seem to have little effect on the amount of systemic risk present in the financial sector. A more significant relationship seems to exist with the stability of the financial sectors in foreign countries. The implication therefore is that complying with individual banking regulations, such as Basel, and corporate governance regulations promoting ethical behaviour, such as King III, may not be adequate. It is therefore proposed that banks should always have sufficient capital reserves in order to mitigate the effects of a financial crisis in a foreign country. The use of worst-case scenario analyses (such as those in this study) could aid in determining exactly how much capital banks could need in order to be considered sufficiently capitalised during a financial crisis, and therefore safe from systemic risk.

scholarly journals Depression in the South African workplace

2016 ◽  
Vol 22 (1) ◽  
pp. 2
Author(s):  
Marthinus P. Stander ◽  
Margreet Bergh ◽  
Helen Elizabeth Miller-Janson ◽  
Janetta C. De Beer ◽  
Frans A. Korb
Keyword(s):  
South Africa ◽  
Work Environment ◽  
South African ◽  
Depression And Anxiety ◽  
The South ◽  
Anxiety Group ◽  
Prevalence Of Depression ◽  
The Individual ◽  
The Impact ◽  
Insight Into

Depression is a common psychiatric disorder and can be costly, having a significant impact on the individual and employers. The South African Depression and Anxiety Group (SADAG) in partnership with HEXOR, with the support of Lundbeck, undertook research into depression in the workplace, because South African information is not available on this topic. It provides insight into the prevalence of depression within the workplace in South Africa, as well as the impact of depression on the employees and employers in terms of sick leave and levels of productivity, especially when the symptoms include cognitive impairment. It is apparent that stigma plays a pivotal role in the reasons for non-disclosure to employers. It further highlights the magnitude of awareness, early detection and the provision of a holistic support system within the work environment, free from bias, to ensure that optimum benefit can be achieved for both employer and employee.

scholarly journals Community structure and centrality effects in the South African company network

2013 ◽  
Vol 44 (2) ◽  
pp. 35-43 ◽  
Author(s):  
I. Durbach ◽  
D Katshunga ◽  
H. Parker
Keyword(s):  
Community Structure ◽  
Social Network ◽  
South African ◽  
Stock Exchange ◽  
The South ◽  
Market Capitalization ◽  
Johannesburg Stock Exchange ◽  
The Relationship

This paper conducts a search for community structure in the South African company network, a social network whose elements are South African companies listed on the Johannesburg Stock Exchange. Companies are connected in this network if they share one or more directors on their respective boards. Discovered clusters, called communities, can be considered to be compartments of the network working relatively independently of one another, making their distribution and composition of some interest. We test whether the discovered communities of companies are (a) statistically significant, and (b) related to other attributes such as sector membership or market capitalization. We also investigate the relationship between the centrality of a company’s position in the network and its market capitalization.

scholarly journals Share repurchase and dividend payout behaviour: The South African experience

2015 ◽  
Vol 46 (3) ◽  
pp. 43-54 ◽  
Author(s):  
N. Wesson ◽  
B. W. Bruwer ◽  
W. D. Hamman
Keyword(s):  
South African ◽  
Best Practice ◽  
Stock Exchange ◽  
Regulatory Environment ◽  
Share Repurchases ◽  
Share Repurchase ◽  
The South ◽  
Johannesburg Stock Exchange ◽  
Dividend Payments ◽  
African Experience

Share repurchases, rather than dividend payments, are increasingly becoming the globally favoured payout method. This has prompted a renewed interest in the field, and raises questions about the actual motivation for share repurchases and whether companies are now repurchasing shares in preference to investing in future growth. This study set out to ascertain whether South African company payout behaviour mirrors global company behaviour. Comprehensive data on share repurchases are, however, not compiled by South African financial data sources or by the Johannesburg Stock Exchange Ltd. In preparation for this study, the authors thus compiled the first comprehensive share repurchase database for companies in selected JSE-listed sectors for the first 11 years (i.e. 1999 to 2009) since share repurchases were first allowed in this country.Share repurchases were found to be a popular payout method, especially in the more recent periods covered in the study. Payout value was dominated by a few companies paying dividends every year and regularly repurchasing shares. Aspects unique to the South African regulatory environment, however, resulted in the South African share repurchase experience not fully mirroring current global practice. The main constraint in the South African share repurchase environment is that comprehensive, actual-time-based share repurchase data are not available. Recommendations are made on how to align the South African regulatory environment with global best practice. Regulatory changes, as well as continued research in the field, will equip stakeholders to make informed decisions.

scholarly journals The Leaders, the Laggers, and the “Vulnerables”

Risks ◽  
2020 ◽  
Vol 8 (1) ◽  
pp. 26
Author(s):  
Veni Arakelian ◽  
Shatha Qamhieh Hashem
Keyword(s):  
Financial Crisis ◽  
Bayesian Network ◽  
Financial Institutions ◽  
Systemic Risk ◽  
Expected Shortfall ◽  
Risk Indicators ◽  
Network Structures ◽  
Lag Effect ◽  
Marginal Expected Shortfall ◽  
The Individual

We examine the lead-lag effect between the large and the small capitalization financial institutions by constructing two global weekly rebalanced indices. We focus on the 10% of stocks that “survived” all the rebalancings by remaining constituents of the indices. We sort them according to their systemic importance using the marginal expected shortfall (MES), which measures the individual institutions’ vulnerability over the market, the network based MES, which captures the vulnerability of the risks generated by institutions’ interrelations, and the Bayesian network based MES, which takes into account different network structures among institutions’ interrelations. We also check if the lead-lag effect holds in terms of systemic risk implying systemic risk transmission from the large to the small capitalization, concluding a mixed behavior compared to the index returns. Additionally, we find that all the systemic risk indicators increase their magnitude during the financial crisis.

Who is responsible for protecting my health during the COVID- 19 pandemic?

2021 ◽  
Author(s):  
Karlien Kallmeyer ◽  
Melvin A Ambele ◽  
Chrisna Durandt ◽  
Graeme Ford ◽  
Simone Grobbelaar ◽  
...  
Keyword(s):  
South Africa ◽  
South African ◽  
Fundamental Question ◽  
South African Government ◽  
Infected Person ◽  
The South ◽  
African Government ◽  
Global Pandemic ◽  
The Government ◽  
The Individual

Since the report of the first COVID-19 infected person in South Africa, COVID-19 moved from being a distant threat to a new reality overnight. Metaphorically, COVID-19 could be described as rain, and in order to be protected one would need to stand under an umbrella. The fundamental question that stems from this is who is holding this protective umbrella? Is the government holding the umbrella or are we holding the umbrella? In this article/commentary/perspective, we briefly discuss the responsibility of the South African government and the individual during this global pandemic, the reasoning behind the implementation of lockdown and the consequences thereof. We conclude that both government and citizens need to cooperatively take responsibility and work together to fight COVID-19. The protective umbrella needs to be held by both government and by ourselves.

scholarly journals Asset pricing in small markets: The South African case

1988 ◽  
Vol 19 (1) ◽  
pp. 11-21 ◽  
Author(s):  
D. J. Bradfield ◽  
G. D.I. Barr ◽  
J. F. Affleck-Graves
Keyword(s):  
Asset Pricing ◽  
South African ◽  
Stock Exchange ◽  
Dividend Yield ◽  
The South ◽  
Johannesburg Stock Exchange ◽  
The One

The authors examine the validity of the CAPM for Johannesburg Stock Exchange (JSE) stocks. Additional effects, namely, dividend yield, size and liquidity are also considered using traditional tests. The results indicate that the one-parameter CAPM is well-specified for the JSE. The betas of gold shares, however, are found to be poor predictors of rand returns - but improve when viewed in dollar terms. None of the above-mentioned effects are found to be significant, however, a slight preference for high-yielding gold shares is documented. Explanations for these findings are offered and contrasted with results documented on the NYSE.

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