Correlation Surprise: The African And South African Case

Joanne Armstrong and David Bradfield ()
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David Bradfield: University of Cape Town

The African Finance Journal, 2015, vol. 17, issue 2, 55-83

Abstract: This paper assesses the usefulness of monitoring market turbulence, return magnitude surprise and correlation surprise as potential signals to assist investors in timing de-risking strategies in the South African and African market settings. The analysis follows Kinlaw and Turkington (2014) who recently proposed the measures of magnitude and correlation surprise by decomposing the market turbulence measure. We find that in periods when correlation surprise spikes that in both the South African and African market environments subsequent periods are characterised by higher risk and lower returns. Our findings thus corroborate the predictive capability of the components of market turbulence.

JEL-codes: G32 (search for similar items in EconPapers)
Date: 2015
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Persistent link: https://EconPapers.repec.org/RePEc:afj:journl:v:17:y:2015:i:2:p:55-83

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