Abstract:
Over the period from January 1997 to December 2007 the South African equity market has been the target of a number of reforms initiated by both the Johannesburg Securities Exchange (JSE) and the South African government. From a review of current emerging markets and financial liberalisation literature, we identify the market attributes that differ between emerging and developed equity markets or that are changed significantly by the financial liberalisation process. The attributes are: · Correlation with major world equity markets · Distribution of returns · Market efficiency · Share price volatility · Stock price synchronicity · Implicit transaction costs Using the FTSE/JSE Top 40 Index as the basis, we conducted a longitudinal study contrasting the values of these attributes for the period 1997 to 1998 with those for the period 2006 to 2007. We then used these results to assess whether the South African equity market has become more like a developed equity market in its behaviour. We find that the South African equity market has made statistically significant progress towards developed market behaviour for all attributes apart from stock price synchronicity. We ascribe the higher level of stock price synchronicity to an increase in the number of resource and industrial shares included in the FTSE/JSE Top 40 Index. Overall we conclude that the South African equity market has become significantly more like a developed market in its behaviour. Copyright
