EQUITY PREMIUM, INFLATION AND MARKET
This report investigated the linkages between three important components of the financialmarket in South Africa, namely equity risk premium, inflation and market volatility. Whileresearch has revealed strong relationships between these factors in other countries, little hasbeen investigated in the local environment.Within the data, two key structural breaks in the equity premium were identified. When thedata within these breaks was analysed, relationships between the three variables were found.Within the three periods defined, a mean equity premium of 7.87%, 10.43% and 0.1%respectively, was measured.Using well-known relationship-measuring statistical and regression analysis tools, the datawere tested for possible relationships. Results showed that the relationships were not linearand as a result correlation and regression were of little use. However, qualitative andgraphical analysis revealed that the equity premium moved in line with inflation, and marketvolatility was delayed by approximately one year
Year of publication: |
2011-04-15
|
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Authors: | Jarvis, Matthew John Kuys |
Subject: | Equity risk premium | Inflation | Market volatility |
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