Title page for ETD etd-05222011-111043

Document Type Master's Dissertation
Author Mokale, Tebogo
URN etd-05222011-111043
Document Title Does contrarian trading by directors provide a signal to outside investors for future abnormal returns in South Africa
Degree MBA
Department Gordon Institute of Business Science
Advisor Name Title
Mr R Gunn Supervisor
  • abnormal returns
  • director trading
  • contrarian trading
Date 2010-11-10
Availability unrestricted

Directors of listed companies earn abnormal returns by trading in a contrarian manner. This research report investigated whether outside investors can earn abnormal returns by following director contrarian trades.

The returns to directors and outsiders, following a director trade were analysed using the event study methodology. The event study methodology utilised director trading information from SENS announcements on the JSE Securities Exchange, daily share prices, betas and price to book values for the selected companies, and daily all share index prices. The focus of the analysis was the post trade Cumulative Average Abnormal Returns (CAAR), in the 20 days following the director trade.

The overall CAAR for all transactions was a statistically significant but economically insignificant 0.43%. When viewed from a transaction type perspective, the CAAR was 0.72% and 0.44% for purchases and sales transactions respectively. This study shows that while directors of listed South African companies do earn abnormal returns, they do not do so while consistently trading in a contrarian manner. In fact, transactions not deemed contrarian generated higher abnormal returns for directors. In addition, the study shows that outside investors do not earn abnormal returns by mimicking directors, and actually, their following of director trades generates the abnormal returns for directors.

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:

Mokale, T 2010, Does contrarian trading by directors provide a signal to outside investors for future abnormal returns in South Africa, MBA dissertation, University of Pretoria, Pretoria, viewed yymmdd < http://upetd.up.ac.za/thesis/available/etd-05222011-111043/>


  Filename       Size       Approximate Download Time (Hours:Minutes:Seconds) 
 28.8 Modem   56K Modem   ISDN (64 Kb)   ISDN (128 Kb)   Higher-speed Access 
  dissertation.pdf 3.34 Mb 00:15:28 00:07:57 00:06:57 00:03:28 00:00:17

Browse All Available ETDs by ( Author | Department )

If you have more questions or technical problems, please Contact UPeTD.