Returns, Political Developments and Economic Forces: A Historical Perspective on the Johannesburg Stock Exchange (Jse): 2010 - 2020

Abstract

To contribute to economic growth and development, a stock market, as a leading economic indicator, should reflect the macroeconomic fundamentals of a country by reacting to political, economic and other significant events via return adjustments for companies listed on the stock market. This article aims to provide a historical perspective on how political and economic events reflected in returns on the Johannesburg Stock Exchange (JSE) between 2010 and 2022. An event study methodology establishes whether the top 20 best and worst weekly return periods on the JSE all-share index (ALSI) coincided with local and international events. The performance of the JSE during this period is dominated by events related to recovering economies and stock markets after the Global Financial Crisis, substantial influence by the U.S. and China, and the devastating effect of the COVID-19 pandemic during 2020. The study concludes that although the JSE clearly and immediately reflected global macroeconomic and political changes, it responded little, or for long, to local developments. However, these local developments and structural deficiencies collectively caused share market performance in South Africa to disconnect from the developed world since 2013, contributing to poor local market performance, reduced investor confidence and increased capital outflows.