Stock return anomalies: evidence from the Johannesburg Stock Exchange

Abstract

This paper investigates the presence of stock return anomalies for stocks listed on the Johannesburg Stock Exchange, covering the period from 1985 to 2010. Explanatory variables include market capitalization, book-to-market equity ratio, momentum in stock returns, net share issues, yield-to-book equity ratio, accrual of operational assets and growth in total assets. It is demonstrated that the sorted returns approach, compared to either correlation or regression analysis, provides much more detailed information regarding the relationships between explanatory variables and stock returns. We find that the anomalous behaviour of stocks on the JSE is in many respects similar to the behaviour observed by Fama and French on the NYSE, and that anomalous return behaviour is still present after compensating for risk. Different types of anomalous behaviour are present within different stock size categories. This study provides further evidence against accepting the EMH in its strong or semi-strong form, as the information used is all publicly available.