African Journals Online
Studies in Economics and Econometrics

Volume 26, Issue 1, April 2001
Abstracts

Supply constraints, export opportunities and agriculture in the Western Cape of South Africa
McDonald, S.Punt, C. 1-15

Abstract: The availability of land imposes constraints on the ability of agricultural industries to respond to opportunities that may accompany trade and policy liberalization, and hence limits the benefits that may be realized. This paper reports results from SAM-Leontief analyses of the impact of policy liberalisation on agriculture in the Western Cape of South Africa when agriculture is supply constrained. The results indicate that liberalisation should have benefited rural communities, especially farmworkers, but the benefits are limited by supply constraints. Relaxing these constraints, through increases in productivity, would increase substantially the benefits for agricultural and food processing industries. 


Are returns in the international economy explained by a single or multi-factor structure?
Davidson, S.Faff, R.Mitchell, H. 17-32

Abstract: This paper examines whether the CAPM beta is a good proxy for the factor loadings of the APT in an international setting. We investigate this question using monthly national market index data drawn from the Morgan Stanley Capital International database, over the twenty-five year period 1970 to 1994. While we find evidence that the international CAPM beta is a consensus measure of up to four return generating factors, the international factor loadings provide a poor explanation of returns.


An evaluation of the BER's trade and building survey panels
Kershoff, G.J. 33-49

Abstract: During the late 1990s, researchers at the BER became concerned about the validity of its trade and building survey results. At that stage the panels of participants had last been updated in 1984. The response rate in some sectors was rather low and the sectoral weights probably no longer reflected the structural changes that occurred over the previous ten years or so. In accordance with international custom, deliberate sampling was used to re-design the BER's trade and building panels. The BER's trade and building panels are broadly fair reflections of the universe taking into account the response rate and the results of a comparison between the composition of the panels and censuses and other official data. The exception is sub-contractors. The building panel is representative of the formal sector, but not of the building sector as a whole, as it does not cover the informal sector.


The behaviour of financial ratios for capital and labour intensive enterprises during the economic cycle
Bloom, J.Z.Lambrechts, I.J.Le Roux, N.J. 51-70

Abstract: The objectives of the study are firstly, to analyse and investigate patterns to determine whether or not there are specific justification(s) for the behaviour exhibited by capital intensive (CI) and labour intensive (LI) enterprises for a particular ratio during either or both the upswing and decline phases of the economic cycle. The second objective is to isolate financial indicators which could possibly be used to forecast financial performance by identifying leads and lags. The findings of the research suggest that CI and LI enterprises differ in terms of the behaviour of certain financial indicators during either or both an upswing and decline of the economic cycle. It is therefore not possible to consider the universal use of financial indicators. It also appears that it is possible to use a large number of traditional indicators to forecast financial performance as they follow the trade cycle. Several indicators suggest the possibility of leading the economic cycle and therefore could provide an indication of an economic upswing or decline.


Measuring contagion - the profile of South African and emerging market risk over the 1998 crisis
Barr, G.D.I.Sharp, L. 71-82

Abstract: This paper considers the emerging market crisis of 1997-98 with particular reference to measuring the affect of the crisis on the South African equity market. In order to do this it characterises an appropriate measure of risk, which can be termed sovereign risk. Sovereign risk measures the risk of default on the debt obligations of a central government. For South Africa it is the spread between a dollar-denominated bonds of the SA government and a dollar-based USA bond of the same tenure. In addition, the paper considers the profile of Rand exchange rate risk over the crisis period. The sovereign and exchange rate risk profile of emerging markets are then compared to that of South Africa.


Market segmentation on the Johannesburg Stock Exchange II
Van Rensburg, P. 83-99

Abstract: Given the reclassification of the Johannesburg Stock Exchange (JSE) sector indices that occurred in March 2000, this paper updates the factor analytic procedure conducted by van Rensburg and Slaney (1997). It is found that the new Financial-Industrial (CI21) and Resources (CI11) indices may be used as observable proxies for the first two principal components extracted from the covariance matrix of JSE returns. Consequently, it is suggested that these indices replace the Industrial and All-Gold index in future applications of the two factor arbitrage pricing theory (APT) model. Prior research is extended by considering the implications of the dichotomy in the return generating processes underlying JSE financial-industrial and resource stocks for the estimation of security betas. It is mathematically demonstrated that this dichotomy implies that the cross-sectional correlation matrix of the market model's residual errors is not diagonal. As a result, conventionally conducted market model regressions are characterised by the problem of omitted variable bias and downwardly biased t statistics. A remedial procedure is proposed, which may serve as a general correction for omitted variable bias in ordinary least squares regression analysis when using panel data. Finally, it is pointed out that the All-Share Index, conventionally employed as the market proxy in South African beta estimation, is not mean-variance efficient given the opportunity for offshore investment. This implies that the capital asset pricing model, as conventionally specified by South African academics does not hold on the JSE.