The impact of payoff period, time and liquidity on style investing in South Africa

Abstract

In line with the majority of research covering equity markets of developed countries, prior studies have found that style investing can offer abnormal returns on the Johannesburg Securities Exchange (JSE). The most profitable style investment approaches appear to be that of value, momentum and size. Due to the ever-evolving nature of capital markets, the high level of market concentration associated with the South African market and the implications associated with rebalancing of portfolios, in this study we examine the impact time, liquidity and payoff period have on style investing on the JSE. Our results suggest that value appears to be the only robust effect while all other style effects seem to be sensitive to time, liquidity and/or payoff period.