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An investigation of the unconditional distribution of South African stock index returns

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  • O. Beelders
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    Abstract

    This article investigates the distribution of four broad stock indexes and four futures indexes on the Johannesburg Stock Exchange (JSE). It finds that the broad indexes are skewed and highly leptokurtic. Whereas the All Share, Industrial and Financial Indexes are negatively skewed, the Gold Index is positively skewed. In addition, the skewness is not only present in the tails, but also in the central part of the distribution. None of these indexes is covariance stationary over the sample period; this may be due to structural changes in the market such as the introduction of an electronic trading system in 1996 and the volatility introduced by the Asian crisis. For the futures indexes, it finds that only the Gold Index is characterized by (positive) skewness. All the futures indexes have excess kurtosis and none of them is covariance stationary. The futures indexes have less serial correlation than the broad indexes because they are constructed from large, highly liquid stocks.

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    Bibliographic Info

    Article provided by Taylor & Francis Journals in its journal Applied Financial Economics.

    Volume (Year): 13 (2003)
    Issue (Month): 9 ()
    Pages: 623-633

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    Handle: RePEc:taf:apfiec:v:13:y:2003:i:9:p:623-633

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    References

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    1. Benoit Mandelbrot, 1963. "The Variation of Certain Speculative Prices," The Journal of Business, University of Chicago Press, vol. 36, pages 394.
    2. Brian Kantor, 1998. "Ownership And Control In South Africa Under Black Rule," Journal of Applied Corporate Finance, Morgan Stanley, vol. 10(4), pages 69-78.
    3. Graham Barr & Jos Gerson & Brian Kantor, 1995. "Shareholders As Agents And Principals: The Case For South Africa'S Corporate Governance System," Journal of Applied Corporate Finance, Morgan Stanley, vol. 8(1), pages 1-32.
    4. repec:att:wimass:9208 is not listed on IDEAS
    5. Pagan, Adrian, 1996. "The econometrics of financial markets," Journal of Empirical Finance, Elsevier, Elsevier, vol. 3(1), pages 15-102, May.
    6. Loretan, Mico & Phillips, Peter C. B., 1994. "Testing the covariance stationarity of heavy-tailed time series: An overview of the theory with applications to several financial datasets," Journal of Empirical Finance, Elsevier, Elsevier, vol. 1(2), pages 211-248, January.
    7. de Vries, Casper G., 1991. "On the relation between GARCH and stable processes," Journal of Econometrics, Elsevier, Elsevier, vol. 48(3), pages 313-324, June.
    8. Benoit Mandelbrot, 1963. "New Methods in Statistical Economics," Journal of Political Economy, University of Chicago Press, University of Chicago Press, vol. 71, pages 421.
    9. Pagan, Adrian R. & Schwert, G. William, 1990. "Testing for covariance stationarity in stock market data," Economics Letters, Elsevier, vol. 33(2), pages 165-170, June.
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    Cited by:
    1. Aggarwal, Raj & Lucey, Brian M., 2007. "Psychological barriers in gold prices?," Review of Financial Economics, Elsevier, Elsevier, vol. 16(2), pages 217-230.

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