Factorising equity returns in an emerging market through exogenous shocks and capital flows

2013/06/22 by Diane Wilcox, Tim Gebbie, Wilcox, Diane +1
Economics, Econometrics and Finance · #FOS: Economics and business #Financial Markets and Investment Strategies #General Finance (q-fin.GN) #Global Financial Crisis and Policies #Risk Management (q-fin.RM) #q-fin.GN #q-fin.RM

paper · pdf · doi:10.48550/arxiv.1306.5302

27 pages, 12 figures

openalex publication_date 2013/06/22 · arxiv created 2013/07/01 · arxiv updated 2013/07/02 · openalex created_date 2025/10/10 · openalex updated_date 2026/07/28

Abstract

A technique from stochastic portfolio theory [Fernholz, 1998] is applied to analyse equity returns of Small, Mid and Large cap portfolios in an emerging market through periods of growth and regional crises, up to the onset of the global financial crisis. In particular, we factorize portfolios in the South African market in terms of distribution of capital, change of stock ranks in portfolios, and the effect due to dividends for the period Nov 1994 to May 2007. We discuss the results in the context of broader economic thinking to consider capital flows as risk factors, turning around more established approaches which use macroeconomic and socio-economic conditions to explain Foreign Direct Investment (into the economy) and Net Portfolio Investment (into equity and bond markets).

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