Original Research

The effects of selected trading strategies on the value of closed-end investment trusts: A test of the efficiency of the Johannesburg Stock Exchange

Narendra Bhana
South African Journal of Business Management | Vol 24, No 3 | a866 | DOI: https://doi.org/10.4102/sajbm.v24i3.866 | © 2018 Narendra Bhana | This work is licensed under CC Attribution 4.0
Submitted: 17 October 2018 | Published: 30 September 1993

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Narendra Bhana, Graduate School of Business, University of Durban-Westville, South Africa

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Abstract

Closed-end investment funds listed on the Johannesburg Stock Exchange invariably trade at discounts from their net asset value. The purpose of this article is to test a series of trading rules to determine whether an investor can capitalize on these discounts to earn excess returns. The buy-and-sell points strategy produced returns significantly in excess of these obtainable by holding the market portfolio or by following a buy-and-hold strategy. Using standard deviation of return as a proxy for risk, the results fail to confirm that an investor had to accept significantly more risk to earn a larger return. However, there is no assurance that the same strategies will produce excess returns in the future. The trading strategies tested over the 1979-88 period may require adjustments in today's market.

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