On bank stock return spillovers in South Africa: Implications for portfolio hedging
Year: 2024
Type: article
Abstract: The purpose of this study is to investigate the return spillovers among the five systemically important banks in South Africa. The study employs a time-varying parameter vector autoregression (TVP-VAR) framework utilising daily data between 2000 and 2024. A minimum return connectedness portfolio is constructed from the spillover indexes and compared with traditional portfolio optimisation methods in terms of risk reduction and reward-to-risk ratios. The research findings reveal that Capitec, the smallest bank in terms of assets, has weaker return connectedness with other banks while ABSA, FirstRand, Nedbank and Standard Bank are moderately connected. Moreover, the two largest banks in terms of assets, Standard and FirstRand, are more connected than any other pairwise connection in the network. During significant events such as national elections, the global financial crisis and the COVID-19 pandemic, system-wide connectedness increases.
Source: Scientific African
Authors: Kingstone Nyakurukwa, Yudhvir Seetharam
Institution: University of the Witwatersrand
Language: English
Subfield: Finance
Domain: Social Sciences
Open Access status: gold
Estimated APC paid: $510
OpenAlex ID: W4402748098