Cointegration between energy commodities and the South African financial market

Abstract: The long-run relationship between three energy commodities, namely crude oil, jet kerosene and natural gas; and the FTSE/JSE Top 40 Index will be examined. A second relationship between the three commodities and the FTSE/JSE Top 40 Index against the South African Rand (versus the United States Dollar) will also be explored to determine the impact of the variables on the ZAR. The analysis of the variables will include correlation, regression, vector autoregression and the Johansen cointegration test to determine linear interdependencies among the variables. The results indicate that there is a cointegrating relationship between the both relationships investigated

Precious metals as safe haven assets in the South African market

Abstract: The role of precious metals as hedges and safe havens has been extensively studied across various markets. However, no precious metals other than gold have been considered in a South African setting. This study extends previous literature by making use of the methodology established by Baur and Lucey (2010) to determine which of the four precious metals provides the most viable hedge and safe haven in relation to the domestic stock and bond markets for South African investors? The results suggest that all four precious metals have significant hedging properties in relation to domestic bond market but not the stock market. It was also determined that while all four metals contain safe haven properties, gold is the only precious metal to act as a significant safe haven against both South African stocks and bonds

An empirical analysis of South African bank profitability

Abstract: The banking sector fulfils a fundamental role within the economy of a country. In South Africa, this sector contributes in excess of 20 percent toward GDP, and is responsible for more than 10 percent of overall employment in the country. This study empirically investigates the most significant determinants of South African bank profitability by examining bank-specific internal and macroeconomic external factors under a panel regression framework. The four largest commercial banks in South Africa as well as South Africa’s largest alternative banking institution were examined between 2006 and 2015. Based on the results obtained, this study concludes that both bank-specific internal as well as macroeconomic external variables are statistically significant determinants of South African bank profitability. The variables of asset quality, capital strength, operational efficiency, economic activity (GDP), annual inflation and the real interest rate were found to be statistically significant. Capital strength, economic activity (GDP), annual inflation and the real interest rate respectively displayed positive relationships to bank profitability, whereas asset quality and operational efficiency displayed inverse relationships to bank profitability