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Threshold convergence between the federal fund rate and South African equity returns around the colocation period

Phiri, Andrew (2017): Threshold convergence between the federal fund rate and South African equity returns around the colocation period.

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Abstract

Using weekly data collected from 20.09.2008 to 09.12.2016, this paper uses dynamic threshold adjustment models to demonstrate how the introduction of high-frequency and algorithmic trading on the Johannesburg Stock Exchange (JSE) has altered convergence relations between the federal fund rate and equity returns for aggregate and disaggregate South African market indices. We particularly find that for the post-crisis period, the JSE appears to operate more efficiently, in the weak-form sense, under high frequency trading platforms.

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