Artikel
Return predictability and valuation ratios: Sector-level evidence on the Johannesburg Stock Exchange
The efficient market hypothesis describes an efficient market as one in which investors cannot consistently predict stock returns because prices instantly reflect all the information flowing into the market. However, return predictability has been documented in many markets. This study tests the predictability of returns using two valuation ratios-the dividend and earnings yields-on the South African market, at both aggregated and sectoral level. Unlike most studies in South Africa, this study employs an apposite present value model, accounts for structural breaks and investigates the non-linearity of the relationship between stock returns and valuation ratios. The results show that returns are predictable at both aggregated and sectoral levels. This finding has implications for market efficiency through enhanced price discovery which, in turn, has implications for investment and portfolio management. However, it should be noted that statistical significance may not translate to economic significance, so there is a need to determine the latter if one intends to use any strategy that relies on this evidence.
- Language
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Englisch
- Bibliographic citation
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Journal: Cogent Economics & Finance ; ISSN: 2332-2039 ; Volume: 8 ; Year: 2020 ; Issue: 1 ; Pages: 1-27
- Classification
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Wirtschaft
Portfolio Choice; Investment Decisions
Asset Pricing; Trading Volume; Bond Interest Rates
Information and Market Efficiency; Event Studies; Insider Trading
International Financial Markets
- Subject
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disaggregated data
dividend yield
earnings yield
present value model
Return predictability
South Africa
- Event
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Geistige Schöpfung
- (who)
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Chipunza, Kudakwashe Joshua
Muguto, Hilary Tinotenda
Muguto, Lorraine
Muzindutsi, Paul-Francois
- Event
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Veröffentlichung
- (who)
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Taylor & Francis
- (where)
-
Abingdon
- (when)
-
2020
- DOI
-
doi:10.1080/23322039.2020.1817252
- Handle
- Last update
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10.03.2025, 11:41 AM CET
Data provider
ZBW - Deutsche Zentralbibliothek für Wirtschaftswissenschaften - Leibniz-Informationszentrum Wirtschaft. If you have any questions about the object, please contact the data provider.
Object type
- Artikel
Associated
- Chipunza, Kudakwashe Joshua
- Muguto, Hilary Tinotenda
- Muguto, Lorraine
- Muzindutsi, Paul-Francois
- Taylor & Francis
Time of origin
- 2020
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