Re-examining the ability to explain future South African banking share returns: A data envelopment analysis approach
South African Journal of Economic and Management Sciences
| Field | Value | |
| Title | Re-examining the ability to explain future South African banking share returns: A data envelopment analysis approach | |
| Creator | van Heerden, Chris Coetzee, Johan | |
| Description | Background: Using financial ratios is considered to be important when making informed judgments about investment portfolios. However, the ‘ideal’ set of ratios is an elusive notion on which the literature has failed to reach any consensus.Aim: This study attempts to identify to what extent so-called ‘non-financial’ measures can outperform ‘traditional’ financial and risk-adjusted performance ratios to explain future share returns for South African banks in a momentum investment strategy.Method: A multi-stage data envelopment analysis model was used in the study.Results: The results suggest that non-financial measures are able to explain up to 90% of banking shares’ future returns, which is a 30% to 40% improvement on that of traditional financial and risk-adjusted performance ratios. In identifying the ‘ideal’ set of ratios for the South African banking industry, this study also found that pure technical efficiency, the price-to-earnings ratio and the static omega ratio were able to explain up to an average of 83% of future banking share returns.Conclusion: The study contributes to the field of portfolio management in that both risk-adjusted performance ratios and non-financial measures can be used as short-term and long-term investment decision-making tools. Further to this, the ability to explain future returns to some extent implies that the South African banking industry may be time-varying-information efficient. | |
| Publisher | AOSIS Publishing | |
| Date | 2019-09-16 | |
| Identifier | 10.4102/sajems.v22i1.2852 | |
| Source | South African Journal of Economic and Management Sciences; Vol 22, No 1 (2019); 18 pages 2222-3436 1015-8812 | |
| Language | eng | |
| Relation |
The following web links (URLs) may trigger a file download or direct you to an alternative webpage to gain access to a publication file format of the published article:
https://sajems.org/index.php/sajems/article/view/2852/1910
https://sajems.org/index.php/sajems/article/view/2852/1909
https://sajems.org/index.php/sajems/article/view/2852/1911
https://sajems.org/index.php/sajems/article/view/2852/1908
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