Explore the evidence.
Understand the reach.

The Adaptive Market Hypothesis (AMH) allows for a re-evaluation of the relationship between macroeconomic variables and stock market returns, acknowledging that this relationship is time-varying and asymmetrical. This study investigates the impact of macroeconomic factors on the Johannesburg Stock Exchange (JSE) sector returns under varying market conditions from January 2008 to December 2024. Using a Markov regime-switching model, the findings show that macroeconomic effects on sectoral returns are regime-dependent and time-sensitive. In bullish markets, inflation growth has a significant negative impact on Industrial sector returns, but no significant effect during bearish regimes. For the Financial sector, inflation and money supply growth negatively affect returns, while the real effective exchange rate growth has a positive impact. In the Resource sector, all macroeconomic variables significantly influence returns during bearish conditions, with inflation growth showing a notable negative effect. Overall, JSE sector returns exhibit bull and bear market dynamics, and the influence of macroeconomic variables is neither uniform nor static aligning with the AMH framework.

Using a methodology from experimental finance based on qualitative analysis tools, this article aims at analyzing the potential existence of the ‘all that glitters attracts’ bias in order to explain the behavior of individual investors. For this purpose, we observed the investment strategies and behaviors of eight students in a continuous trading situation over three days. Using a fictional portfolio of 100,000 euros, the participants were given the opportunity to trade shares in companies from the CAC40 index (the 40 largest market capitalizations on the French market). Regarding the size of the companies in the index, we observe a high volume of information disclosed to the markets which could, to a certain extent, complicate the interpretation of the information signals sent. Based on trading journals - and more specifically the number of transactions carried out on specific stocks - we find that participants are strongly focused on companies that are closely followed by financial analysts and receive the most media coverage. To support our findings, we have also used a process of participative observation to collect first-hand experiences from participants during the experiment. The different elements collected suggest that the participants’ decision-making processes were largely influenced by the intensity of the companies’ communication and their presence in the information flows provided by the stock market websites. This conclusion leads us to believe that, in the mind of individual investors, marketing linked to the stock market life of companies seems to prevail over any informational content. In any case, in their decision-making process, the participants clearly selected shares that were in the spotlight, and so, depending on the context of analysis and the investigative tools used, we confirm the presence of an ‘anything that glitters attracts’ bias, a strong focus on available information and some herd effects. The contribution of this article is threefold: the analysis of a bias largely neglected by scientific studies in the financial field, the use of an innovative experimental protocol, and the use of methodological tools that provide an assessment of individuals' personal perceptions.

This study investigates the factors influencing investment decision-making within South Africa's financial markets, focusing on psychological, demographic, and external market elements. Drawing from Prospect Theory, the research reveals a deviation from traditional behavioral assumptions, highlighting that external market dynamics, rather than individual risk perceptions or demographic traits, predominantly guide investor behavior. Using a quantitative cross-sectional design, data were collected through structured questionnaires from 120 randomly selected South African investors aged 18 and older with market experience. Structural equation modelling assessed factors influencing risk perception and subsequently, investment behavior. The findings demonstrate that market-related variables significantly influence risk perception (? = 0.653, p < 0.001) and decision-making, aligning with the Efficient Market Hypothesis. In contrast to Prospect Theory's expectations, risk perception had no significant direct effect on investment choices (? = -0.009, p = 0.933). Cognitive biases and emotional influences exerted a moderate impact, while demographic characteristics, including gender, education, and experience, showed minimal influence on investment decisions, suggesting that practical market experience outweighs formal training. With robust construct validation (CR = 0.711 to 0.951), the study enhances the reliability and credibility of the findings. It highlights global regulatory frameworks as crucial for investor confidence. These results contribute to behavioral finance literature and support practical implications for policy, market transparency, and investor education. Future research should consider diverse populations and qualitative investors' perspectives.

With an observational research design, using only publicly available stock price data, this paper aims to demonstrate that momentum extends beyond the medium term (3 to 12 months) when generating momentum profiles using a preset term-structure. The optimal holding period is a function of the formation period – the longer the formation period, the shorter the holding period and vice versa. Convention has it that once a stock begins to gain momentum it usually maintains it for 15 months before faltering, reversing some gains after 18 months. A full momentum cycle (formation plus hold) should complete within 24 months, peaking at 18 months. A dataset of 370 stocks, listed on the Johannesburg Stock Exchange (JSE) between 2007 and 2024, was used to generate momentum profiles from daily historical prices. Profiling shifts the focus onto the holding period to classify momentum cycles on the eventual outcome. Cycles are classified as mini, regular, ultra, super and hyper, depending on duration. Clusters of momentum appear when generating profiles for individual stocks, allowing one to identify optimal entry and exit points into active momentum cycles. Results show that major cycles comprise many minor cycles. Medium-term momentum or regular cycles, therefore, may consist of several mini cycles. The main finding of this paper is that there is potential to remain in active cycles for several years, thereby holding momentum. A custom momentum index, updated weekly with variable members, may give some indication of the state of momentum in a market at a particular point in time as an increase in index levels tend to correspond with an increase in active momentum cycles or momentum activity.

The increasing inter relationship between financial markets have led to the discovery of new risk dynamics particularly when considering downside risk. Recent advances in econometric modelling have prompted the search for new insights into the intertemporal dynamics between downside risks and expected stock returns. Therefore, the aim of this study was to investigate this relationship in the S&P 500, the FTSE 100, the DAX, the Nikkei 225, and the TSX Composite, covering the period from January 2000 to December 2023. Using a time-varying transition probability model, the findings revealed consistent negative correlations between downside risk measures and expected returns across all markets, with CVaR exhibiting stronger inverse relationships compared to VaR. These findings challenge the classical risk-return trade-off but align with behavioural explanations where heightened risk aversion during downturns suppresses returns. The regime-switching analysis further uncovers asymmetry in transition probabilities where high-risk regimes persist with a 74% probability, while low-risk regimes show greater stability. By implication, this study provides empirical support for regulatory frameworks prioritizing tail risk mitigation, particularly in volatile markets.

The Adaptive Market Hypothesis (AMH) allows for a re-evaluation of the relationship between macroeconomic variables and stock market returns, acknowledging that this relationship is time-varying and asymmetrical. This study investigates the impact of macroeconomic factors on the Johannesburg Stock Exchange (JSE) sector returns under varying market conditions from January 2008 to December 2024. Using a Markov regime-switching model, the findings show that macroeconomic effects on sectoral returns are regime-dependent and time-sensitive. In bullish markets, inflation growth has a significant negative impact on Industrial sector returns, but no significant effect during bearish regimes. For the Financial sector, inflation and money supply growth negatively affect returns, while the real effective exchange rate growth has a positive impact. In the Resource sector, all macroeconomic variables significantly influence returns during bearish conditions, with inflation growth showing a notable negative effect. Overall, JSE sector returns exhibit bull and bear market dynamics, and the influence of macroeconomic variables is neither uniform nor static aligning with the AMH framework.

Using a methodology from experimental finance based on qualitative analysis tools, this article aims at analyzing the potential existence of the ‘all that glitters attracts’ bias in order to explain the behavior of individual investors. For this purpose, we observed the investment strategies and behaviors of eight students in a continuous trading situation over three days. Using a fictional portfolio of 100,000 euros, the participants were given the opportunity to trade shares in companies from the CAC40 index (the 40 largest market capitalizations on the French market). Regarding the size of the companies in the index, we observe a high volume of information disclosed to the markets which could, to a certain extent, complicate the interpretation of the information signals sent. Based on trading journals - and more specifically the number of transactions carried out on specific stocks - we find that participants are strongly focused on companies that are closely followed by financial analysts and receive the most media coverage. To support our findings, we have also used a process of participative observation to collect first-hand experiences from participants during the experiment. The different elements collected suggest that the participants’ decision-making processes were largely influenced by the intensity of the companies’ communication and their presence in the information flows provided by the stock market websites. This conclusion leads us to believe that, in the mind of individual investors, marketing linked to the stock market life of companies seems to prevail over any informational content. In any case, in their decision-making process, the participants clearly selected shares that were in the spotlight, and so, depending on the context of analysis and the investigative tools used, we confirm the presence of an ‘anything that glitters attracts’ bias, a strong focus on available information and some herd effects. The contribution of this article is threefold: the analysis of a bias largely neglected by scientific studies in the financial field, the use of an innovative experimental protocol, and the use of methodological tools that provide an assessment of individuals' personal perceptions.

This study investigates the factors influencing investment decision-making within South Africa's financial markets, focusing on psychological, demographic, and external market elements. Drawing from Prospect Theory, the research reveals a deviation from traditional behavioral assumptions, highlighting that external market dynamics, rather than individual risk perceptions or demographic traits, predominantly guide investor behavior. Using a quantitative cross-sectional design, data were collected through structured questionnaires from 120 randomly selected South African investors aged 18 and older with market experience. Structural equation modelling assessed factors influencing risk perception and subsequently, investment behavior. The findings demonstrate that market-related variables significantly influence risk perception (? = 0.653, p < 0.001) and decision-making, aligning with the Efficient Market Hypothesis. In contrast to Prospect Theory's expectations, risk perception had no significant direct effect on investment choices (? = -0.009, p = 0.933). Cognitive biases and emotional influences exerted a moderate impact, while demographic characteristics, including gender, education, and experience, showed minimal influence on investment decisions, suggesting that practical market experience outweighs formal training. With robust construct validation (CR = 0.711 to 0.951), the study enhances the reliability and credibility of the findings. It highlights global regulatory frameworks as crucial for investor confidence. These results contribute to behavioral finance literature and support practical implications for policy, market transparency, and investor education. Future research should consider diverse populations and qualitative investors' perspectives.

The increasing inter relationship between financial markets have led to the discovery of new risk dynamics particularly when considering downside risk. Recent advances in econometric modelling have prompted the search for new insights into the intertemporal dynamics between downside risks and expected stock returns. Therefore, the aim of this study was to investigate this relationship in the S&P 500, the FTSE 100, the DAX, the Nikkei 225, and the TSX Composite, covering the period from January 2000 to December 2023. Using a time-varying transition probability model, the findings revealed consistent negative correlations between downside risk measures and expected returns across all markets, with CVaR exhibiting stronger inverse relationships compared to VaR. These findings challenge the classical risk-return trade-off but align with behavioural explanations where heightened risk aversion during downturns suppresses returns. The regime-switching analysis further uncovers asymmetry in transition probabilities where high-risk regimes persist with a 74% probability, while low-risk regimes show greater stability. By implication, this study provides empirical support for regulatory frameworks prioritizing tail risk mitigation, particularly in volatile markets.

With an observational research design, using only publicly available stock price data, this paper aims to demonstrate that momentum extends beyond the medium term (3 to 12 months) when generating momentum profiles using a preset term-structure. The optimal holding period is a function of the formation period – the longer the formation period, the shorter the holding period and vice versa. Convention has it that once a stock begins to gain momentum it usually maintains it for 15 months before faltering, reversing some gains after 18 months. A full momentum cycle (formation plus hold) should complete within 24 months, peaking at 18 months. A dataset of 370 stocks, listed on the Johannesburg Stock Exchange (JSE) between 2007 and 2024, was used to generate momentum profiles from daily historical prices. Profiling shifts the focus onto the holding period to classify momentum cycles on the eventual outcome. Cycles are classified as mini, regular, ultra, super and hyper, depending on duration. Clusters of momentum appear when generating profiles for individual stocks, allowing one to identify optimal entry and exit points into active momentum cycles. Results show that major cycles comprise many minor cycles. Medium-term momentum or regular cycles, therefore, may consist of several mini cycles. The main finding of this paper is that there is potential to remain in active cycles for several years, thereby holding momentum. A custom momentum index, updated weekly with variable members, may give some indication of the state of momentum in a market at a particular point in time as an increase in index levels tend to correspond with an increase in active momentum cycles or momentum activity.