Title page for ETD etd-04152012-124945


Document Type Master's Dissertation
Author Nel, Gerhardus Johannes
URN etd-04152012-124945
Document Title Cover stories as an investment indicator : an investigation of companies listed on the Johannesburg Stock Exchange
Degree MBA
Department Gordon Institute of Business Science
Supervisor
Advisor Name Title
Prof A Saville Supervisor
Keywords
  • abnormal returns
  • cover stories
  • behavioural finance
  • market inefficiency
Date 2012-03-08
Availability unrestricted
Abstract
Investors rely on secondary information sources, like cover stories, as market indicators due to time, information and resources constraints. However, studies in the US market gave mixed results about the potential use of cover stories while no publish research could be found in South Africa related to investors reaction to cover stories or whether an understanding of investment periods, company specific characteristics or bounded rational behaviour would yield superior abnormal returns from cover stories.

In total, 1218 cover stories related to publicily listed companies were recorded from FinWeek and Financial Mail for the period 1985 to 2008 and categorised based on the Likert scale developed by Arnold et al. (2007). Event study methodology was used in the research.

The research found evidence that investors did pay attention to very optimistic cover stories. Positive an neutral cover stories were contrarian indicators, while negative cover stories were momentum indicators of future company investment performances and the abnormal returns for an investment portfolio based on these cover story effects were optimised by short-selling cover story companies from healthcare, general retail and general mining industries and buying shares in control companies from the same industries and company sizes. The ability to earn long-term abnormal returns proofed weak form market inefficiency for the JSE.

Copyright 2010, University of Pretoria. All rights reserved. The copyright in this work vests in the University of Pretoria. No part of this work may be reproduced or transmitted in any form or by any means, without the prior written permission of the University of Pretoria

Please cite as follows:

Nel, GJ, 2010, Cover stories as an investment indicator: an investigation of companies listed on the Johannesburg Stock Exchange, MBA dissertation, University of Pretoria, Pretoria, viewed yymmdd < etd-04152012-124945/>

F/12/4/353/zw

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