The cross-section of Johannesburg Securities Exchange listed equity returns (1994-2011)

Abstract

Purpose

The aim of this study is to examine the impact of technical and fundamental (referred to as firm-specific) factors on the cross-sectional variation in equity returns on the Johannesburg Securities Exchange (JSE).

Design/methodology/approach

To reach the objective, the study follows an empirical research approach. Cross-sectional regression analyses, factor-portfolio analyses and multifactor analyses are performed using 50 firm-specific factors for listed shares over three sample periods during 1994 to 2011.

Findings

The results suggest that a strong value and momentum effect is present and robust on the JSE, while a size effect is present but varies over time. Multifactor analyses show that value and momentum factors are collectively significant in explaining the cross-section of returns. The results imply that the JSE is either not an efficient market or that current market risk models are incorrectly specified.

Practical implications

The findings of the study offers practical application possibilities to investment analysts and portfolio managers.

Originality/value

To the authors’ knowledge, this is the first study to use such a comprehensive data set for the specific analyses on the JSE over such a long period. All previously identified statistical biases are addressed in this study. Different approaches are applied to compare results and test for robustness for the first time.

Citation

Van Heerden, J.D. and Van Rensburg, P. (2015), "The cross-section of Johannesburg Securities Exchange listed equity returns (1994-2011)", Studies in Economics and Finance, Vol. 32 No. 4, pp. 422-444. https://doi.org/10.1108/SEF-09-2014-0181