Kerry McCullough - Academia.edu (original) (raw)

Papers by Kerry McCullough

African Journal of Business and Economic Research, 2021

Studies in Economics and Econometrics

Understanding how information, and specifically volatility, flows between markets is of obvious i... more Understanding how information, and specifically volatility, flows between markets is of obvious interest to market participants. Given the importance of the FTSE/JSE Top 40 index as a barometer of the performance of the Johannesburg Stock Exchange (JSE) in South Africa, this paper investigates the volatility characteristics and volatility spillover effects between it and its corresponding futures contracts. A BEKK-GARCH approach is adopted to model volatility spillover effects, and the DCC-GARCH model applied as a confirmatory analysis of the BEKK-GARCH findings. Volatility spillover flows from the futures market to the index market, indicating that the FTSE/JSE Top 40 futures is the more informationally efficient market.

Agrekon, 1999

Cointegration analysis is used to test whether the South African futures market for white maize w... more Cointegration analysis is used to test whether the South African futures market for white maize was efficient (futures prices predict spot (cash) prices that reflect all publicly available information) in 1997 and 1998. Tests are also conducted to assess whether or not white maize futures prices are unbiased predictors of future spot prices (for effective price discovery). There was no long-run relationship between white maize futures and spot prices for 1997, but there is evidence of a long-run relationship between these price series in 1998. Furthermore, the 1998 futures price was an unbiased predictor of future spot prices for both the annual and three-month contract. This could be evidence of a market learning process and a progression towards efficiency, which has seen a marked increase in market liquidity (contract volumes traded) since late 1996. TOETSING VAN DIE DOELTREFFENDHEID VAN DIE SUID-AFRIKAANSE TERMYNKONTRAKMARK VIR WITMIELIES 'n Doeltreffende termynkontrakmark behoort 'n vooruitskatting te bied van die toekomstige kontantprys wat alle openbaar beskikbare inligting weerspieël; ideaalweg, vir doeltreffende prysblootlegging sou sulke vooruitskattings ook onsydig wees. Die verhandeling van witmielietermynkontrakte het teen die middel van 1996 in Suid-Afrika begin nadat die Mielieraad se magte om mielieprodusentepryse vas te stel, afgeskaf is. Kointegrasieontleding van die doeltreffendheid van witmielietermynkontrakte toon geen langtermynverhouding tussen termynkontrak-en kontant-(loko-) pryse vir 1997 nie, maar daar is aanduidings van 'n langtermynverhouding tussen hierdie prysreekse in 1998. Die 1998-termynkontrakprys was 'n onsydige voorspeller van latere kontantpryse. Dit is bewys van 'n mark leerproses, wat 'n merkbare toename in marklikwiditeit (verhandelde kontrakvolumes) sedert laat in 1996 beleef het.

African Finance Journal, 2018

Price discovery is an integral function of financial exchanges, while volatility is a primary con... more Price discovery is an integral function of financial exchanges, while volatility is a primary concern of market participants. Few studies consider both within an intraday equities context. This paper examines the FTSE/JSE Top 40 index and index futures market, and determines this market’s: (i) price discovery process; (ii) respective contributions to the price discovery process; and (iii) volatility spillover process. Volatility spillover is estimated with dynamic conditional correlation GARCH models. Price discovery is futures-led (5-minute interval) – although bi-directional in shorter intervals. Common Factor Weights show that price discovery is dominated by the futures market. Volatility spillover is a bi-directional process.

African Journal of Business Management, 2013

This study examined the price discovery process in the South African futures and spot markets for... more This study examined the price discovery process in the South African futures and spot markets for white maize. Engle-Granger and Johansen tests of cointegration were performed after which an Error Correction Model, Vector Error Correction Model and Impulse Response functions were formulated representing the long-run relationship between spot and futures prices for white maize. It was found that spot and futures prices for white maize were cointegrated indicating the presence of a long-run relationship between spot and futures prices. Further study on this relationship indicated that price discovery occurred in the spot market. The paper concludes by discussing the policy implications of this finding. Key words: Price discovery, spot market, futures market, cointegration.

African Review of Economics and Finance, 2017

Price discovery refers to flows of information, describing how and when information is reflected ... more Price discovery refers to flows of information, describing how and when information is reflected in market prices. It is not unusual for there to be more than one financial instrument in a given market that is linked to, or derived from, a single specific asset. This results in a complex set of relationships where market news is not only reflected by price changes in one asset, but may be reflected in a number of different assets, potentially at different points in time. Given the arbitrage potential of less than instantaneous price changes, studies of price discovery aim to determine which market reflects new information first. This study is the first to examine the price discovery process on the South African Johannesburg Stock Exchange since several significant market changes occurred, including the introduction of Exchange Traded Funds (ETFs). This paper examines the FTSE/JSE Top 40 Index, the Top 40 Index Futures and the SATRIX Top 40 ETF for the period 2003-2015. Findings demo...

Investment Analysts Journal, 2020

Fund fact sheets are intended to provide investors with information necessary to make investment ... more Fund fact sheets are intended to provide investors with information necessary to make investment decisions. For passive funds, the inclusion of cumulative returns for the fund and benchmark enable investors to measure the fund's tracking performance using tracking difference. However, fund managers rely on tracking error to measure tracking performance, which is rarely presented. We evaluate the differences between these two metrics to ascertain whether the use of one or the other measure by investors could impact their investment decision. Results reveal that tracking error and tracking difference capture different elements of tracking performance, with varying rankings across the two measures for a sample of United States (US) funds. The empirical findings are robust to an adjustment for serial correlation, periods of extreme market volatility and varying measurement horizons. Recommendations for industry practice are made in light of these findings.

Cogent Economics & Finance, 2020

The number of South African firms that have sought cross-listing in regional and global markets h... more The number of South African firms that have sought cross-listing in regional and global markets has been increasing. Many firms increase their presence beyond local markets, and one of these avenues is through cross-listing; however, it remains unclear whether the home or host market contributes more to the incorporation of information in cross-listed stocks. This study examined the price discovery process of Johannesburg Stock Exchange (JSE) domiciled stocks with a cross-listing on the New York Stock Exchange (NYSE). The price discovery of crosslisted stocks was tested using Johansen's and Phillips-Ouliaris' cointegration, the vector error correction model and common factor weights. Long-term relationships consistent with the law of one price were found. Contrary to the home bias hypothesis, results indicated that the NYSE dominated price discovery. Fund managers and investors who have included JSE cross-listed stocks in their portfolios should devote more attention to the NYSE as information flows appear to occur mainly from the NYSE to JSE. Further, results suggest that there is co-movement and integration between the USA and South Africa which diminishes diversification benefits for investors. ABOUT THE AUTHOR Kudakwashe J. Chipunza is pursuing a PhD (Development Finance) focusing on financial inclusion and financial vulnerability. His research interests lie in asset pricing in emerging markets, and development finance focused on household welfare, financial inclusion and financial literacy. Professionally, he has worked in nongovernmental organisations undertaking monitoring and evaluation of various projects. Kudzanai R. Tsunga is in the process of completing his PhD (Finance) at the University of KwaZulu-Natal, focusing on the impact of the financial economy on real economic growth in South Africa. His key research interests are on growth and asset pricing in emerging financial markets. He is employed as an investment administrator for an investment reporting firm in Johannesburg. Kerry F. McCullough is a Senior Lecturer (Finance) at the University of KwaZulu-Natal. Her research interests are capital markets, exchange traded funds, and higher education. This study was inspired by Mr Chipunza and Mr Tsunga's preparations for pursuing their doctoral dissertations.

Journal of Economic and Financial Sciences, 2018

Maximising firm value remains a key tenet of corporate managers. Firms with lower illiquidity and... more Maximising firm value remains a key tenet of corporate managers. Firms with lower illiquidity and volatility attract lower risk premiums, and these are associated with a lower cost of capital and higher firm value. Internationalisation is one avenue purported to provide liquidity and volatility benefits – possibly lowering both liquidity and volatility risk premiums. This study investigated whether South African domiciled stocks experience a surge in liquidity and/or decline in volatility subsequent to internationalisation. The findings show that internationalisation resulted in a surge in liquidity, and this increase was persistent as suggested by the trading volume and Amihud illiquidity measures of stock liquidity; however, the turnover measure indicated that such liquidity gains were temporary. Similarly, volatility declines after internationalisation were temporary. There was inconclusive evidence to show that internationalised stocks had higher liquidity relative to purely dom...

Innovations in Education and Teaching International, 2016

Abstract Consistent with current higher education concerns with student engagement and the studen... more Abstract Consistent with current higher education concerns with student engagement and the student experience, this study explored third-year undergraduate Finance students’ experiences of lecture-based active learning tasks. Finance students from the 2012 and 2014 cohorts from a South African university were invited to complete an anonymous questionnaire and participate in a focus group discussion. Most students affirmed the use of lecture-based active learning tasks, and highlighted how the related peer interactions and immediate application of Finance concepts were beneficial for their motivation and interest. In contrast, some students were disparaging of the lecture-based active learning tasks. Their dissenting views are incorporated as points of tension in the higher education teaching and learning process. The study also highlights the critical role that a passionate and student-centred teacher has on how active learning tasks are received by students during lectures, and generally on student engagement, student learning and the student experience.

Investment Analysts Journal, 2015

ABSTRACT The Efficient Market Hypothesis holds that it is not possible to ‘beat the market’ and t... more ABSTRACT The Efficient Market Hypothesis holds that it is not possible to ‘beat the market’ and that a passive investment strategy is optimal. Traditionally investors have been able to do this by investing in index funds but the emergence of Exchange Traded Funds (ETFs) has provided an alternative passive investment strategy. This paper employs several measures of tracking error to test the tracking ability of index funds and ETFs which track the FTSE/JSE Top 40 index. We find evidence that ETF's are superior tracking instruments, although there is evidence to suggest that the performance of index funds has improved over the most recent three-year period.

Studies of market efficiency and price discovery use financial time series data, a common example... more Studies of market efficiency and price discovery use financial time series data, a common example being that of spot and futures prices over a given time period. The spot series is considered ‘continuous’ and is taken from one specific asset. The futures series is more complicated. This is due to the fact that the futures series represents multiple contracts which are often traded simultaneously. Empirical research shows clear support for the use of prices on the nearby contract for constructing the futures price series. It is less clear which method for rolling over from one futures contract to the next is preferred. Using the FTSE/JSE Top40 Index and futures contracts, two common rollover approaches are implemented: a rollover one day prior to contract expiry, and a rollover at the end of the month immediately prior to the expiry month. It is found that results are largely unaffected by the choice of rollover procedure, however, there is evidence that the rollover decision influen...

Agrekon, 2013

ABSTRACT The efficiency of futures markets for agricultural commodities is an important issue for... more ABSTRACT The efficiency of futures markets for agricultural commodities is an important issue for participants in the agricultural sector who rely on futures contracts to manage price risk and to assist in planning. Tests of market efficiency in futures markets typically address the relationship between spot and futures prices through the application of cointegration techniques. This study employs both the Engle-Granger's and the Johansen's tests for cointegration in order to examine the efficiency of the futures market in South Africa for white maize, which is the most important commodity traded on the South African Futures Exchange by volume. Near spot and futures prices are found to be cointegrated, and there is evidence to indicate that this market is both unbiased and without a risk premium, indicating a weak-form efficient market. This is in contrast to the findings of previous papers, which examined the early years of this market, and points to an improvement in the efficiency of this market.