{"id":{"repo_id":"cape-town","oai_identifier":"oai:open.uct.ac.za:11427/17344"},"canonical_url":"https://search.dev.ndltd.org/etd/cape-town/oai:open.uct.ac.za:11427/17344","repository":{"repo_id":"cape-town","name":"University of Cape Town","base_url":"https://open.uct.ac.za/oai/request"},"display":{"title":"An analysis into the hedging effectiveness and efficiency of the share index futures market in South Africa","abstract":"There has been much written on the ability of futures to reduce risk thereby hedging against potential market declines. However, the effect on return has been largely overlooked. This study investigates the risk and return effectiveness of hedging and hedging strategies using share index futures (SIF) market in South Africa. The empirical analysis is based on actual market data applied in terms of the most prominent hedging strategies, namely the traditional, minimum-variance, beta and Howard & D'Antonio (H&D) strategies. As hedging effectiveness is dependent on market efficiency, an analysis of the pricing efficiency of the South African market is performed with reference to the cost-of-carry valuation model and arbitrage pricing techniques. The results overwhelmingly indicate that the minimum-variance hedge strategy is the most optimal of the four strategies in terms of both risk and return. The beta hedge performed badly in terms of both risk and return (even worse than the naive traditional hedge strategy) and often led to overhedging. The beta strategy is not considered appropriate as an estimate of the minimum-variance hedge ratio in the South African situation because the futures price fluctuates significantly more than the spot index resulting in overstated hedge ratios.","abstract_html":"There has been much written on the ability of futures to reduce risk thereby hedging against potential market declines. However, the effect on return has been largely overlooked. This study investigates the risk and return effectiveness of hedging and hedging strategies using share index futures (SIF) market in South Africa. The empirical analysis is based on actual market data applied in terms of the most prominent hedging strategies, namely the traditional, minimum-variance, beta and Howard & D'Antonio (H&D) strategies. As hedging effectiveness is dependent on market efficiency, an analysis of the pricing efficiency of the South African market is performed with reference to the cost-of-carry valuation model and arbitrage pricing techniques. The results overwhelmingly indicate that the minimum-variance hedge strategy is the most optimal of the four strategies in terms of both risk and return. The beta hedge performed badly in terms of both risk and return (even worse than the naive traditional hedge strategy) and often led to overhedging. The beta strategy is not considered appropriate as an estimate of the minimum-variance hedge ratio in the South African situation because the futures price fluctuates significantly more than the spot index resulting in overstated hedge ratios.","abstract_has_math":false,"creators":["Levett, Peter"],"institution":"College of Accounting","degree_name":null,"degree_level":null,"degree_discipline":null,"degree_department":null,"school":null,"contributors":[],"advisors":["Page, Mike"],"committee_chairs":[],"committee_members":[],"year":1992,"date_issued":"1992","date_published":"1992","updated_at":"2026-07-22T22:23:14Z","subjects":[],"languages":["eng"],"rights":[],"rights_urls":[],"identifier_entries":[]},"links":{"outbound_url":"http://hdl.handle.net/11427/17344","outbound_label":"Handle","outbound_source":"dc:identifier.uri"},"metadata_groups":[{"id":"people","label":"People","entries":[{"key":"dc:contributor.advisor","label":"Advisor","values":["Page, Mike"]},{"key":"dc:creator","label":"Author","values":["Levett, Peter"]}]},{"id":"academic_context","label":"Academic Context","entries":[{"key":"dc:date.accessioned","label":"Dc Date Accessioned","values":["2016-02-29T12:02:33Z"]},{"key":"dc:date.available","label":"Dc Date Available","values":["2016-02-29T12:02:33Z"]},{"key":"dc:date.issued","label":"Date","values":["1992"]},{"key":"dc:publisher.department","label":"Dc Publisher Department","values":["College of Accounting"]},{"key":"dc:publisher.institution","label":"Dc Publisher Institution","values":["University of Cape Town"]},{"key":"dc:type","label":"Dc Type","values":["Master Thesis"]},{"key":"dc:type.qualificationlevel","label":"Dc Type Qualificationlevel","values":["Masters"]},{"key":"dc:type.qualificationname","label":"Dc Type Qualificationname","values":["MCom"]}]},{"id":"language_rights","label":"Language and Rights","entries":[{"key":"dc:language.iso","label":"Language (ISO)","values":["eng"]}]},{"id":"identifiers","label":"Identifiers","entries":[{"key":"dc:identifier.uri","label":"Identifier URI","values":["http://hdl.handle.net/11427/17344"]}]},{"id":"additional","label":"Additional Metadata","entries":[{"key":"dc:description","label":"Description","values":["Bibliography: pages 209-219."]},{"key":"dc:description.abstract","label":"Abstract","values":["There has been much written on the ability of futures to reduce risk thereby hedging against potential market declines. However, the effect on return has been largely overlooked. This study investigates the risk and return effectiveness of hedging and hedging strategies using share index futures (SIF) market in South Africa. The empirical analysis is based on actual market data applied in terms of the most prominent hedging strategies, namely the traditional, minimum-variance, beta and Howard & D'Antonio (H&D) strategies. As hedging effectiveness is dependent on market efficiency, an analysis of the pricing efficiency of the South African market is performed with reference to the cost-of-carry valuation model and arbitrage pricing techniques. The results overwhelmingly indicate that the minimum-variance hedge strategy is the most optimal of the four strategies in terms of both risk and return. The beta hedge performed badly in terms of both risk and return (even worse than the naive traditional hedge strategy) and often led to overhedging. The beta strategy is not considered appropriate as an estimate of the minimum-variance hedge ratio in the South African situation because the futures price fluctuates significantly more than the spot index resulting in overstated hedge ratios."]},{"key":"dc:title","label":"Title","values":["An analysis into the hedging effectiveness and efficiency of the share index futures market in South Africa"]}]}],"canonical_facts":{"dc:contributor.advisor":["Page, Mike"],"dc:creator":["Levett, Peter"],"dc:date.accessioned":["2016-02-29T12:02:33Z"],"dc:date.available":["2016-02-29T12:02:33Z"],"dc:date.issued":["1992"],"dc:description":["Bibliography: pages 209-219."],"dc:description.abstract":["There has been much written on the ability of futures to reduce risk thereby hedging against potential market declines. However, the effect on return has been largely overlooked. This study investigates the risk and return effectiveness of hedging and hedging strategies using share index futures (SIF) market in South Africa. The empirical analysis is based on actual market data applied in terms of the most prominent hedging strategies, namely the traditional, minimum-variance, beta and Howard & D'Antonio (H&D) strategies. As hedging effectiveness is dependent on market efficiency, an analysis of the pricing efficiency of the South African market is performed with reference to the cost-of-carry valuation model and arbitrage pricing techniques. The results overwhelmingly indicate that the minimum-variance hedge strategy is the most optimal of the four strategies in terms of both risk and return. The beta hedge performed badly in terms of both risk and return (even worse than the naive traditional hedge strategy) and often led to overhedging. The beta strategy is not considered appropriate as an estimate of the minimum-variance hedge ratio in the South African situation because the futures price fluctuates significantly more than the spot index resulting in overstated hedge ratios."],"dc:identifier.uri":["http://hdl.handle.net/11427/17344"],"dc:language.iso":["eng"],"dc:publisher.department":["College of Accounting"],"dc:publisher.institution":["University of Cape Town"],"dc:title":["An analysis into the hedging effectiveness and efficiency of the share index futures market in South Africa"],"dc:type":["Master Thesis"],"dc:type.qualificationlevel":["Masters"],"dc:type.qualificationname":["MCom"]},"updated_at":"2026-07-22T22:23:14Z"}