Macroeconomic Surprises and Stock Returns in South Africa
Stellenbosch Working Paper Series No. WP05/2012Publication date: 2012
Author(s):
[protected email address] (Department of Economics, University of Stellenbosch)
The objective of this paper is to explore the sensitivity of industry-specific stock returns to monetary policy and macroeconomic news. The paper looks at a range of industry-specific South African stock market indices and evaluates the sensitivity of these indices to a various unanticipated macroeconomic shocks. We begin with an event study, which examines the immediate impact of macroeconomic shocks on the stock market indices, and then use a Bayesian Vector Autoregressive (BVAR) analysis, which provides insight into the dynamic effects of the shocks on the stock market indices, by allowing us to treat the shocks as exogenous through appropriate setting of priors defining the mean and variance of the parameters in the VAR. The results from the event study indicate that with the exception of the gold mining index, where the CPI surprise plays a significant role, monetary surprise is the only variable that consistently negatively affects the stock returns significantly, both at the aggregate and sectoral levels. The BVAR model based on monthly data, however, indicates that, in addition to the monetary policy surprises, the CPI and PPI surprises also affect aggregate stock returns significantly. However, the effects of the CPI and PPI surprises are quite small in magnitude and are mainly experienced at shorter horizons immediately after the shock.
JEL Classification:C22, C32, E31, E44, G1
Keywords:Bayesian Vector Autoregressive Model, Event Study, Macroeconomic Surprises, Stock Returns.
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Upcoming Seminars
Monday 28 July 202512:00-13:00
Dr Neil Rankin: Ceo Of Predictive Insights & Stellenbosch University
Topic: "TBC"
12:00-13:00
Prof Willem Boshoff: Stellenbosch University
Topic: "Two competing approaches in South African competition policy: merger control and anti-cartel enforcement over the past 30 years"
12:00-13:00
Professor Johan Fourie: Stellenbosch University
Topic: "Economic History: TBC"
BER Weekly
18 Jul 2025 Encouraging data, but messy politics while US tariff deadline loomsThe big global data prints of the week came on Tuesday, with better-than-expected Chinese GDP growth for Q2 and US core CPI coming in lower than expected, but still (finally) reflecting some signs of tariffs being passed on to consumers. Locally, the uptick in mining production and retail sales was positive for Q2 GDP dynamics. In addition to the data,...
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