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Correlation Surprise: The African And South African Case

Author

Listed:
  • Joanne Armstrong
  • David Bradfield

    (University of Cape Town)

Abstract

This paper assesses the usefulness of monitoring market turbulence, return magnitude surprise and correlation surprise as potential signals to assist investors in timing de-risking strategies in the South African and African market settings. The analysis follows Kinlaw and Turkington (2014) who recently proposed the measures of magnitude and correlation surprise by decomposing the market turbulence measure. We find that in periods when correlation surprise spikes that in both the South African and African market environments subsequent periods are characterised by higher risk and lower returns. Our findings thus corroborate the predictive capability of the components of market turbulence.

Suggested Citation

  • Joanne Armstrong & David Bradfield, 2015. "Correlation Surprise: The African And South African Case," The African Finance Journal, Africagrowth Institute, vol. 17(2), pages 55-83.
    • Handle: RePEc:afj:journl:v:17:y:2015:i:2:p:55-83
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    Cited by:

    1. Dmitry A. Endovitsky & Viacheslav V. Korotkikh & Denis A. Khripushin, 2021. "Equity Risk and Return across Hidden Market Regimes," Risks, MDPI, vol. 9(11), pages 1-21, October.

    More about this item

    JEL classification:

    • G32 - Financial Economics - - Corporate Finance and Governance - - - Financing Policy; Financial Risk and Risk Management; Capital and Ownership Structure; Value of Firms; Goodwill

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