A framework for evaluating the benchmark risk of South African equity portfolios

• Main Author: Kruger, Ryan
• Other Authors: Van Rensburg, Paul
• Format: Dissertation
• Language: English
• Published: University of Cape Town 2014
• Online Access: http://hdl.handle.net/11427/10732

Includes bibliographical references. === The aim of this study is to identify and quantify those primary aspects of risk which impact on the construction of benchmark ind ices as well as active portfolios in the South African market. The appropriateness of tile application of the new FTSE classification structure with regard to the particular structure of the local exchange on 30 June 2002 has been placed in question. An initial cluster analysis of the index returns underlying the new classification demonstrated that there were significant behavioural anomalies amongst the new index structure with many Financial-Industrial indices now grouped closely with Resources stocks. A principal factors analysis of the market sectors indicated that the strong Financial-Industrials and Resources dichotomy was present within the market but also demonstrated that a number of Financial-Industrial indices, most notably Basic Industries and Cyclical Consumer Goods, demonstrated either loadings on both factors or loaded solely on the Resources factor rather than their own Financial-Industrials factor. An investigation on a share level found that in most cases one or two large cap shares were responsible for the behaviour of their sectors as a whole and that each of the shares in question was either dual-listed or had significant exposure to foreign markets.