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CAN LEADING BUSINESS CYCLE INDICATORS PREDICT THE DIRECTION OF THE SOUTH AFRICAN COMMERCIAL SHARE PRICE INDEX?
Author(s) -
MOOLMAN ELNA,
JORDAAN JOHANNES
Publication year - 2005
Publication title -
south african journal of economics
Language(s) - English
Resource type - Journals
SCImago Journal Rank - 0.502
H-Index - 31
eISSN - 1813-6982
pISSN - 0038-2280
DOI - 10.1111/j.1813-6982.2005.00005.x
Subject(s) - index (typography) , economic indicator , business cycle , econometrics , market share , industrial production index , share price , economics , performance indicator , lead (geology) , logit , business , computer science , marketing , macroeconomics , finance , production (economics) , geomorphology , world wide web , stock exchange , geology
Leading indicators are a popular way to predict turning points in the business cycle. However, since the lead time of these indicators differ, those with a longer lead could potentially also be used to predict turning points in other leading indicators. This paper empirically explores the viability of using leading indicators to predict the turning points of an index of commercial shares on the JSE Securities Exchange. Although share prices are leading the business cycle, other leading indicators that lead the business cycle by a longer period should lead share prices and, therefore, could potentially be useful in predicting the direction of share price movements. The objective of this study is to evaluate and compare the performance of different leading indicators in leading the commercial share price index and in predicting turning points in the commercial share price index. In addition, a multivariate logit model is developed and estimated using these leading indicators in an attempt to improve the accuracy of forecasting the direction of the commercial share index.