Cyclicality of size, value and momentum on the Johannesburg stock exchange
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Date
2019
Authors
Journal Title
Journal ISSN
Volume Title
Publisher
University of the Western Cape
Abstract
Over the past four decades, size, value and momentum effects have been uncovered on stock
markets, and several multifactor asset pricing models have been proposed to explain them.
The associated premiums have been found to be time-varying and the explanations behind the
effects are still debated. In South Africa, contradictory findings have been reported on the
existence of those effects and the explanatory power of multifactor models. More important,
the cyclicality of the effects and the risk/mispricing debate have been given little attention.
In this regard, this study purports to establish the existence of size, value and momentum
effects, investigate the explanatory power of the Fama-French three- and five-factor models
(FF3F and FF5F respectively), and Carhart four-factor model (C4F), and examine the
cyclicality and risk-based rationale of the style premiums on the Johannesburg Stock
Exchange (JSE). Using a research sample comprised of common stocks included in the
FTSE/JSE All Share Index (ALSI) for the period 1 January 2002 - 31 December 2018, the
study subdivides the examination period into two business cycles, with each cycle including
one upward phase and one downward phase
Description
Magister Commercii - MCom
Keywords
Stock markets, Multifactor models, Cyclicality, Explanatory power, Johannesburg stock exchange, Business cycles, Value effect