Portfolio construction in South Africa with regard to the exchange rate

In South Africa the exchange rate receives a large amount of attention, due to its volatility and its perceived effect on share returns. This dissertation examines the international literature regarding exchange rate exposure and replicates their methods in a South African context to determine the model that finds the most exchange rate exposure. With this model, and a few variations, the persistence of exchange rate exposure is examined, where it is found that a few shares consistently act as the best hedges against R/$ depreciation and similarly a few shares are consistently the best at exploiting Rand strength. With this in mind two hedging techniques are compared in their ability to protect against a R/$ depreciation, and simultaneously provide market related returns, against the ITRIX exchange traded fund. It was found that the methods were successful in that they were able to hedge against R/$ depreciation while still participating in the recent rapid growth on the J.S.E.

Grantor dc:publisher.institution

Department of Statistical Sciences

Year dc:date.issued

2006

Author dc:creator

• Holdsworth, Christopher G

Advisor dc:contributor.advisor

• Barr, Graham

Language dc:language.iso

eng

Handle dc:identifier.uri

http://hdl.handle.net/11427/11264

OAI identifier oai:identifier

oai:open.uct.ac.za:11427/11264