Macroeconomic Surprises and Stock Returns in South Africa
The objective of this paper is to explore the sensitivity of industry-specific stock returns to monetary policy and macroeconomic news. The paper looks at a range of industry-specific South African stock market indices and evaluates the sensitivity of these indices to a various unanticipated macroeconomic shocks. We begin with an event study, which examines the immediate impact of macroeconomic shocks on the stock market indices, and then use a Bayesian Vector Autoregressive (BVAR) analysis, which provides insight into the dynamic effects of the shocks on the stock market indices, by allowing us to treat the shocks as exogenous through appropriate setting of priors defining the mean and variance of the parameters in the VAR. The results from the event study indicate that with the exception of the gold mining index, where the CPI surprise plays a significant role, monetary surprise is the only variable that consistently negatively affects the stock returns significantly, both at the aggregate and sectoral levels. The BVAR model based on monthly data however, indicates that, in addition to the monetary policy surprises, the CPI and PPI surprises also affect aggregate stock returns significantly. However, the effects of the CPI and PPI surprises are quite small in magnitude and are mainly experienced at shorter horizons immediately after the shock.
To our knowledge, this item is not available for
download. To find whether it is available, there are three
1. Check below under "Related research" whether another version of this item is available online.
2. Check on the provider's web page whether it is in fact available.
3. Perform a search for a similarly titled item that would be available.
|Date of creation:||Apr 2012|
|Contact details of provider:|| Postal: PRETORIA, 0002|
Phone: (+2712) 420 2413
Fax: (+2712) 362-5207
Web page: http://www.up.ac.za/economics
More information through EDIRC
References listed on IDEAS
Please report citation or reference errors to , or , if you are the registered author of the cited work, log in to your RePEc Author Service profile, click on "citations" and make appropriate adjustments.:
- Monique Reid, 2009.
"The sensitivity of South African inflation expectations to surprises,"
16/2009, Stellenbosch University, Department of Economics.
- Monique Reid, 2009. "The Sensitivity Of South African Inflation Expectations To Surprises," South African Journal of Economics, Economic Society of South Africa, vol. 77(3), pages 414-429, 09.
- Monique Reid, 2009. "The Sensitivity of South African Inflation Expectations to Surprises," Working Papers 131, Economic Research Southern Africa.
- Litterman, Robert B, 1986.
"Forecasting with Bayesian Vector Autoregressions-Five Years of Experience,"
Journal of Business & Economic Statistics,
American Statistical Association, vol. 4(1), pages 25-38, January.
- Robert B. Litterman, 1985. "Forecasting with Bayesian vector autoregressions five years of experience," Working Papers 274, Federal Reserve Bank of Minneapolis.
- Martha Banbura & Domenico Giannone & Lucrezia Reichlin, 2008.
"Large Bayesian VARs,"
Working Papers ECARES
2008_033, ULB -- Universite Libre de Bruxelles.
- Domenico Giannone & Martha Banbura & Lucrezia Reichlin, 2008. "Bayesian VARs with large panels," ULB Institutional Repository 2013/13388, ULB -- Universite Libre de Bruxelles.
- Bańbura, Marta & Giannone, Domenico & Reichlin, Lucrezia, 2008. "Large Bayesian VARs," Working Paper Series 0966, European Central Bank.
- Banbura, Marta & Giannone, Domenico & Reichlin, Lucrezia, 2007. "Bayesian VARs with Large Panels," CEPR Discussion Papers 6326, C.E.P.R. Discussion Papers.
- Marta Bańbura, 2008. "Large Bayesian VARs," 2008 Meeting Papers 334, Society for Economic Dynamics.
- Refet S. Gürkaynak & Brian Sack & Eric Swanson, 2005. "The Sensitivity of Long-Term Interest Rates to Economic News: Evidence and Implications for Macroeconomic Models," American Economic Review, American Economic Association, vol. 95(1), pages 425-436, March.
- Rangan Gupta & Alain Kabundi, 2009.
"Forecasting Macroeconomic Variables Using Large Datasets: Dynamic Factor Model versus Large-Scale BVARs,"
143, Economic Research Southern Africa.
- Gupta, Rangan & Kabundi, Alain, 2011. "Forecasting Macroeconomic Variables Using Large Datasets: Dynamic Factor Model versus Large-Scale BVARs," Indian Economic Review, Department of Economics, Delhi School of Economics, vol. 46(1), pages 23-40.
- Rangan Gupta & Alain Kabundi, 2008. "Forecasting Macroeconomic Variables Using Large Datasets: Dynamic Factor Model versus Large-Scale BVARs," Working Papers 200816, University of Pretoria, Department of Economics.
- Thomas Doan & Robert B. Litterman & Christopher A. Sims, 1983.
"Forecasting and Conditional Projection Using Realistic Prior Distributions,"
NBER Working Papers
1202, National Bureau of Economic Research, Inc.
- Thomas Doan & Robert B. Litterman & Christopher A. Sims, 1986. "Forecasting and conditional projection using realistic prior distribution," Staff Report 93, Federal Reserve Bank of Minneapolis.
- Athanasios Orphanides, 2001.
"Monetary Policy Rules Based on Real-Time Data,"
American Economic Review,
American Economic Association, vol. 91(4), pages 964-985, September.
- Z. Chinzara, 2010. "Macroeconomic uncertainty and emerging market stock market volatility: The case for South Africa," Working Papers 187, Economic Research Southern Africa.
- Rangan Gupta & Alain Kabundi, 2008. "A Dynamic Factor Model for Forecasting Macroeconomic Variables in South Africa," Working Papers 200815, University of Pretoria, Department of Economics.
- Bonga-Bonga, Lumengo & Kabundi, Alain, 2015. "Monetary Policy Instrument and Inflation in South Africa: Structural Vector Error Correction Model Approach," MPRA Paper 63731, University Library of Munich, Germany.
- Clive Coetzee, 2002. "Monetary Conditions and Stock Returns: A South African Case Study," Finance 0205002, EconWPA.
When requesting a correction, please mention this item's handle: RePEc:pre:wpaper:201212. See general information about how to correct material in RePEc.
For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: (Rangan Gupta)
If references are entirely missing, you can add them using this form.