An analysis of the South African FTSE/JSE all-share index and the macroeconomic variables during the period 2002 to 2010

Abstract

This article looks at the relationship between the monthly data series of the FTSE/JSE all-share index and macroeconomic variables in South Africa for the period 2002 to 2010. While the use of aggregate indices can be misleading when interpreting the actual performance of companies, there is a need for investors and portfolio managers to understand the dynamics of stock prices. The macroeconomic variables used in the study are the manufacturing and mining indices, JSE total return, prime overdraft rate, the exchange rates between the South African rand and the US dollar and the rate of inflation. The findings suggest that the FTSE/JSE index's correlation with the macroeconomic variables studied is statistically significant, a finding similar to studies done in other countries. It was also found that the mining index, a unique index to mining countries, had a non-significant positive correlation with the FTSE/JSE index.