Van Den Hone , R.; A leck-G a es, J. F.
A icle
In e na ional di e si ica ion and he Sou h A ican in es o
Sou h A ican Jou nal o Business Managemen
P o ided in Coope a ion wi h:
Uni e si y o S ellenbosch Business School (USB), Bell ille, Sou h A ica
Sugges ed Ci a ion: Van Den Hone , R.; A leck-G a es, J. F. (1985) : In e na ional di e si ica ion and
he Sou h A ican in es o , Sou h A ican Jou nal o Business Managemen , ISSN 2078-5976, A ican
Online Scien i ic In o ma ion Sys ems (AOSIS), Cape Town, Vol. 16, Iss. 2, pp. 87-91,
h ps://doi.o g/10.4102/sajbm. 16i2.1078
This Ve sion is a ailable a :
h ps://hdl.handle.ne /10419/217893
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In e na ional
di e si ica ion
and
he
Sou h
A ican
in es o
R.
an
den
Hone
and
J.F.
A leck-G a es
Uni e si y o Cape Town, Cape Town
In
he
e en
o a elaxa ion o sc apping o he cu en
exchange
con ol egula ions, he Sou h A ican in es o
could
conside
an
in es men in o eign s ocks o commodi-
ies
as
well
as
local s ocks.
In
his a icle wo app oaches
o
he
assessmen o he pas pe o mance o a ious local
and
o eign secu i y ma ke s
a e
conside ed. Ini ially he
pas
pe o mance o
24
ma ke s
a e
s udied indi idually
and
hei e u ns
and
co esponding isks
a e
examined, wi h
special
e e ence o he exchange a e ac o . Secondly he
s a is ical echnique o mul idimensional scaling is applied
o
he
24
ma ke s. Since po olio di e si ica ion is a
undamen al aim o any a ional in es o , secu i ies om
ma ke s
which exhibi dissimila p ice mo emen s would
be
a ou able
o inclusion
in
a po olio.
The
me hod o
mul idimensional scaling esul s
in
a map-like pic u e which
gi es
he
in es o a isual display o hose ma ke s which
mo e
oge he
(i.e.
limi ed di e si ica ion oppo uni ies)
and
hose
ha
mo e
di e en ly
(i.e.
p o ide good di e si ica ion
oppo uni ies).
S.
A .
J.
Bus. Mgm .
1985,
16:
87-91
lndien
'n
e slapping o e wyde ing
an
die huidige
handelsbehee maa e~ls sou in ee,
mag
die Suid-A ikaanse
belegge
in es e ing
in
plaaslike sowel
as
bui elandse
aandele
o p oduk e, oo weeg.
In
hie die a ikel wo d wee
benade ingswyses o die ass elling
an
die p es asie
an
e skeie
plaaslike
en
bui elandse seku i ei sma k e
in
die
e lede
besp eek. Ee s ens wo d die his o iese p es asie
an
24
ma k e indi idueel bes udee
en
hul opb engs
en
oo een-
koms ige isiko onde soek, me spesiale e wysing
na
die
handelskoe s ak o . Tweedens wo d die s a is iese egniek
an
mul idimensionele ska ing oegepas op die
24
ma k e.
Aangesien
po olio-di e si ikasie
'n
undamen ele oogme k
an
enige asionele in es ee de
is,
sal
seku i ei e
an
ma k e
wa
e skillende p ysbewegings openbaa oo delig
wees
i opname
in
'n po olio.
Die
me ode
an
mul i-
dimensionele skaling lewe 'n kaa ui legp en jie wa die
belegge
'n
isuele ui leg bied
an
die ma k e wa
saam
beweeg
( .w. bepe k e di e si ikasiemoon likhede)
en
die wa
e skillend
an
mekaa beweeg ( .w. die wa goeie di e si-
ikasiemoon likhede skep).
S.-A .
Tydks . Bed y sl. 1985,
16:
87-
91
R.
an
den
Hone
Depa men
o
Ma hema ical S a is ics, Uni e si y
o
Cape Town,
P i a e Bag, Rondebosch, 7700 Republic
o
Sou h A ica
J.F.
A leck-G a es*
G adua e School
o
Business, Uni e si y
o
Cape Town, P i a e
Bag,
Rondebosch,
7700
Republic
o
Sou h A ica
*To
whom co espondence should be add essed
Accep ed
Janua y
1985
In oduc ion
The abolishmen o he
inancial
and
discoun
on 7 Feb ua y
1983
has
led
in es men manage s o
belie e
ha he cu en
exchange
con ol
egula ions
a e
o
be
elaxed.
This
elaxa ion
is
likely
o
p oceed
in
s eps,
acco ding
o
he
Di ec o -Gene al
o
Finance,
D
Joop
de
Loo ,
each
s ep
being
subjec ed o
igo ous es ing be o e he ul ima e objec i e
o
a o ally
un es ic i e
low
o
unds
o and
om
he
coun y
is
allowed
(De Loo ,
1983).
The second s ep
in
he elaxa ion
p ocess
ook
place
on
5 Sep embe
1983
when
he gold
mines
gained pe mission o
be
paid
o
hei
gold
in
US
dolla s,
and
hey
we e
gi en
some
lexibili y
in
hei handling o
hese
unds. I
has
been
sugges ed
by
D
de
Loo ha he
nex
s ep
in
he elaxa ion
p ocess
will
be
ha he majo ins i u ions ( he
li e
insu e s,
pension
unds
and
mining
houses)
will
be
g an ed pe mission
o
in es
a po ion
o
hei
asse s
ab oad.
This
will
allow
companies o make po olio
in es men s
ou
o
he coun y.
The inal s ep
will
be
o pe mi indi iduals o
mo e
money
in and ou
o
Sou h A ica a
will.
In
iew
o
he p oposed elaxa ion
o
he
exchange
con ol
egula ions
as
hey
apply o he Sou h A ican in es o ,
i
is
wo hwhile
in es iga ing
he pas pe o mance
o
he al e na-
i es
a ailable o
him.
In
his a icle he oppo uni ies o
inc eased
e u n
as
well
as
he
po en ial
isk
educ ion
ob ained
h ough in e na ional di e si ica ion a e analysed om an
ex
pos poin
o
iew.
Al e na i e
in es men
media
In
he absence
o
exchange con ol egula ions he Sou h
A ican in es o
would
be
able o conside an in es men in
common
s ocks
(bo h Sou h A ican and
o eign),
me als, o
so commodi ies ( aded on he wo ld's commodi y exchan-
ges).
I
should
be
no ed ha in es o s
would
also
be
able o
in es
in
co po a e o go e nmen bonds, bo h local and
o eign. Howe e ,
hese
secu i ies
ha e
no been conside ed
in
his s udy
because
o
he
desi e
o
concen a e on he mo e
specula i e ma ke s. In addi ion, he e a e many
o~he
o ms
o
non-secu i y asse s,
such
as
eal
es a e, a , an iques, and
s amps
in
which
an in es o may in es . These
asse s
will
no
be
conside ed
as
hey
a e he e ogeneous
in
na u e and ma ke
alues a e ha d o es ablish o each indi idual i em. The
psychological e u n om owning such a non-secu i y
asse
is
also di icul o quan i y.
Fo he pu poses
o
his s udy he s ocks quo ed on he
Johannesbu g S ock Exchange (JSE) ha e
been
di ided in o
se en
secu i y g oups acco ding o he
i s
le el
composi e
indices
o he JSE
Ac ua ies
Index.
They
a e,
oge he
wi h
he
88
p opo ion
each con ibu es
o
he
JSE
All Sha e Index:
JSE
All
Gold
Index (32,61
%)
JSE
Coal
Index ( 3, 15%)
JSE
Diamonds Index ( 7,
99%)
JSE
Me als
and
Mine als Index (
4,65%)
JSE
Mining Financials Index (20,00%)
JSE
Financial Index (
5,06%)
JSE
Indus ial Index (26,54%)
Thus he JSE
is
ega ded as a se en 'secu i y' ma ke , whe e
each secu i y
is
in ac a po olio
o
simila sha es agg ega ed
in o a composi e index.
By a he mos hea ily aded
o
he wo ld's exchanges a e
he
New
Yo k S ock Exchange (NYSE) and he London S ock
Exchange (LSE), and mos empi ical s udies ha e been ca ied
ou
on
one
o
bo h
o
hese wo exchanges.
The
SA
in es o
would hus be mos likely
o
di a,1
his
a en ion
o
hese
ma ke s as he
is
somewha
mo e
amilia wi h hem in com-
pa ison o o he exchanges. Acco dingly, hese wo exchanges
we e chosen
o
ep esen al e na i e s ock ma ke in es men s
ha
would be a ailable
o
SA
in es o s in
he
e en
o
a
elaxa ion in o eign exchange egula ions.
O
cou se i
is
no
in ended o imply
ha
SA
in es o s would be limi ed
o
hese
wo
exchanges
bu
i
is
p obable
ha
many
o
he unds
in es ed in o eign s ock exchanges would
be
in es ed in hese
wo
ma ke s.
In in es ing in a o eign s ock exchange local in es o s will
ha e
o
decide
be ween
an
ac i e
o
passi e po olio manage-
men s a egy.
Tha
is, should hey ac i ely esea ch he
company's
quo ed
on
ha
exchange
and
a emp
o
iden i y
unde alued secu i ies (i.e.
an
ac i e managemen policy)
o
should hey conside hese ma ke s as easonably e icien in
he
sense
o
he
e icien ma ke hypo hesis
and
he e o e
me ely choose a well di e si ied po olio
o
e en
an
index
S.-A . Tydsk . Bed y sl.
198S,
16(2)
und (i.e. he passi e
app oach)?
In his s udy
we
ha e
assumed
he
la e . Hence a composi e index om each o
hese
wo
exchanges
has
been
aken
o
be ep esen a i e o
he o eign s ock exchanges. They a e he S anda d and Poo 's
'500' Index (NYSE)
and
he
Financial Times UK Ac ua ies
Index (LSE).
The
wo ld's
commodi y
ma ke s
can
be
b oadly di ided
in o
wo
g oups -me als
and
so commodi ies. Ten
com-
monly
quo ed
me als
and
i e
commonly
quo ed
so
com-
modi ies ha e been chosen
o
ep esen hese ma ke s.
This
g oup
is
a non-exhaus i e subse
o
all possible aded
commodi ies. Howe e ,
an
examina ion
o
he pas pe o -
mance
o
hese commodi ies will gi e
an
indica ion
o
he
in es men oppo uni ies a ailable
o
he
SA
in es o
in
he
commodi ies ma ke s.
Pe o mance,
ola ili y,
and
he
cu ency
ac o
The
24 secu i ies s udied (se en
Sou h
A ican 'secu i ies',
wo
o eign indices, en me als,
and
i e so commodi ies) appea
in
Table
l,
oge he wi h
he
cu encies in which hey a e
quo ed. In addi ion, pe o mance
and
isk measu es calcula ed
om
mon h-end
da a
o
he
pe iod Feb ua y
1965
-
Janua y 1980 (180
mon hs
in all) a e p esen ed. These da a
a e
all exp essed in
he
cu ency
o
he
loca ion
o
he ma ke
(e.g. NYSE in dolla s,
LSE
in pounds).
I
should
be
no ed
ha
he
domes ic isk
is
de ined as
he
s anda d
de ia ion
o
he
annual
e u ns o e
he
en i e 15-yea pe iod.
F om
he
ankings
o
he
compound
annual
e u n
i
will
be seen ha he bes e u ns in ecen yea s ha e
been
achie ed
by
gold, sil e , suga ,
and
pla inum. Howe e , hese secu i ies
(as well as zinc, coppe , co on,
and
SA
inancial sha es)
ha e
he
la ges isk, as
can
be
seen
om
he
ankings
o
he
domes ic isk.
Table
1 Risks and e u ns
(in
local cu encies)
o
24
secu i ies,
Feb ua y
1965-
Janua y
1980
Compound
Domes ic
Local e u n Ranking isk Ranking
Secu i y cu ency
(OJopa)
o
e u n
(OJopa)
o
isk
JSE
Coal
SA
Rand 11,23
12
22,08
17
JSE
Diamonds
SA
Rand 12,44 6 31,06
12
JSE
All Gold
SA
Rand
11,63 9 32,48
II
JSE
Me & Min
SA
Rand
11,58
10
29,32
14
JSE
Min Fin
SA
Rand
11,86 7 20,94 20
JSE
Financial
SA
Rand
6,40
21
35,74 5
JSE
Indus
SA
Rand 5,90
23
21,50
19
S d &
Poo 's
us$ 1,92
24
14,85
23
UK
ACT
index
UK£
5,98
22
27,07
16
Lead
UK£
8,38
16
32,59
10
Tin
UK£
12,92 5 21,93
18
Zinc
UK£
8,09
17
40,70 3
Sil e
UK£
19,61 2 46,66
Aluminium
UK£
9,74
13
13,19 24
An imony
UK£
11,85 8 32,70 9
Coppe
UK£
7,53
18
38,10 4
Nickel
UK£
11,29
II
16,34
22
Pla inum
UK£
14,19 4 32,97 8
Gold us$ 21,74 I 34,36 7
Wool
UK£
6,74 20 30,66
13
Co on
UK£
7,15
19
34,87 6
Suga
UK£
15,23 3 45,96 2
Whea
UK£
8,71
15
19,91
21
Maize
UK£
8,85
14
27,67
15
s.
A .
J.
Bus.
Mgm .
1985,
16(2)
89
Table
2 Risks and e u ns (in SA
and)
o
24
secu i ies: Feb ua y
1965
o Janua y
1980
Compound
annual Ranking Exchange
e u n o e u ns gain
Secu i y
(%) (%)
(%)
JSE Coal
11,23
11
0,00
JSE Diamonds
12,44
6 0,00
JSE
All
Gold
11,63
8
0,00
JSE
Me
& Min
11,58
9 0,00
JSE Min
Fin
11,86 7 0,00
JSE Financial 6,40
21
0,00
JSE lndus . 5,90
22
0,00
S d & Poo 's 2,84
24
-1,05
UK
ACT index 5,44
23
0,67
Lead
7,82
16
0,67
Tin
13,34
5
0,67
Zinc
7,53
17
0,67
Sil e
26,14 I
0,67
Aluminium 9,17
13
0,67
An imony
11,27
10
0,67
Coppe 6,98
18
0,67
Nickel
10,72
12
0,67
Pla inum
13,60
4
0,67
Gold 22,84 2
-1,05
Wool
6,81
19
0,67
Co on 6,60
20
0,67
Suga
14,63
3
0,67
Whea 8,15
15
0,67
Maize 8,29
14
0,67
This in o ma ion
is
no
o
g ea ele ance o he Sou h
A ican in es o as all he e u ns
and
isks in Table 1 a e
calcula ed om p ices exp essed in local cu encies. Mo e
meaning ul igu es o he Sou h A ican in es o would
be
hose
calcula ed when he p ices a e all exp essed in SA ands.
Table 2 con ains pe o mance
and
ola ili y igu es o
all
24
secu i ies in and e ms o he same 15-yea pe iod, namely
Feb ua y 1
%5
-
Janua y
1980. The domes ic isk
is
de ined
in
he same way as be o e.
The
o al isk is de ined as he
s anda d de ia ion
o
he annual e u ns
o
each secu i y
(in
SA
ands) o e he en i e 15-yea pe iod, while he exchange
isk
is
he s anda d de ia ion
o
he e u ns
o
he
US
dolla
and
UK
pound exchange a es (exp essed in pe cen pe
annum). The exchange gain
is
he pe cen age e u n pe
annum o each
o
he wo cu encies unde s udy (Solnik
& Noe zlin, 1983). This indica es how hese cu encies ha e
mo ed ela i e o he Sou h A ican and o e he en i e
180-mon h pe iod. This
is
posi i e in he case
o
UK pounds-
qu~ ed secu i ies (indica ing
an
o e all app ecia ion
o
he and
agams s e ling), nega i e in he case
o
US dolla -quo ed
secu i ies
(indica ing
an
o e all dep ecia ion
o
he and agains
he
US
dolla )
and
o
cou se ze o in he case
o
he Sou h
A ican secu i ies.
Table 2 indica es ha he bes e u ns om a Sou h A ican
~ es o 's poin
o
iew
would ha e been achie ed by in es ing
m gold, sil e , suga ,
and
pla inum. Suga , an imony, and
he
Sou h A ican inancial sha es end o be he mos ola ile.
C?
in e es
is
ha bo h gold
and
sil e a e only mode a ely
nsky o he Sou h A ican in es o . This
is
because he
co ela ion be ween hese secu i ies
and
he exchange a e
was
la ge
and nega i e, hus 'smoo hing' ou he p ice
se ies.
When
he
s anda d de ia ions
o
e u ns
o
hese se ies a e calcula ed
hey
a e much smalle han hose
o
he o iginal se ies. They
Ranking
Domes ic
Exchange
Coe icien
To al o o al
isk isk
o
isk
isk
(%)
(%)
a ia ion
22,08
14
22,80
0,00
1,97
31,06
8
31,60
0,00
2,50
32,48
6
32,48
0,00
2,79
29,32
10
29,32
0,00
2,53
20,94
17
20,94
0,00
1,77
35,74
3
35,74
0,00
5,58
21,50
16
21,50
0,00
3,64
20,48
18
14,85
8,16
7,21
31,46
7
27,07
10,05
5,78
25,24
12
32,59
10,95
3,23
18,07
21
21,93
10,95
1,35
33,26
5
40,70
10,95
4,42
19,51
20
46,66
10,95
0,75
15,63
23
13,10
10,95
1,70
37,09
2
13,19
10,95
3,29
30,93
9
38,10
10,95
4,43
12,19
24
16,34
10,95
1,14
22,06
15
32,97
I0,95
1,62
19,57
19
32,97
8,16
0,86
29,13
II
34,36
I0,95
4,28
33,43
4
30,66
10,95
5,04
42,55
I
34,87
10,95
3,59
17,07
22
54,96
10,95
2,09
22,90
13
27,67
10,95
2,76
a e hus
less
isky o he Sou h A ican in es o
i
held
in
ands a he han in dolla s o pounds s e ling. The Sou h
A ican secu i ies appea o
be
less
a ac i e o he Sou h
A ican in es o since hei ankings, acco ding o o al
isk,
ha e dec eased
by
h ee
o
ou places on a e age whe eas
hei ankings acco ding o e u n ha e ha dly changed.
The coe icien
o
a ia ion
is
a measu e
o
he ela ionship
be ween he e u n and he isk in SA ands. In essence,
i
exp esses he isk pe uni pe cen
o
e u n. Thus, i an
in es o alues e u n and isk equally, he lowe he alue
o
he coe icien
o
a ia ion, he mo e desi able
is
he
secu i y.
I
is
clea om Table 2 ha sil e , gold, and nickel
o e he bes e u n o hei isk
le els.
Bo h
US
sha es and
UK
sha es as
well
as
mos
o
he so commodi ies a e unde-
si able om his poin
o
iew.
I
is
clea ha he exchange a e had a signi ican e ec
on
he pe o mance and isk
o
hese secu i ies
in
he 15-yea
pe iod s udied. I
is
also impo an o no e ha he secu i ies
which p o e desi able o a Sou h A ican in es o
in
e ms
o
isk and e u n may no be as desi able o a
US
in es o
when he base cu ency used
is
US
dolla s.
Fu he mo e he di e ence be ween ola ili y ( isk)
in
SA
and and
in
local cu encies
is
always smalle han he
exchange isk, owing
o
he low and e en nega i e co ela ion
be ween secu i y p ices and exchange a e mo emen s. This
has been ound o be ue in gene al.
I
can hus be seen ha he a iabili y
o
he exchange a e
in ecen yea s has played a majo ole
in
making ce ain
o eign secu i ies and commodi ies mo e
o
less
a ac i e o
he SA in es o .
A
mul idimensional
scaling
app oach
Modem po olio heo y has shown ha
in
assessing
he alue
90
o
a pa icula in es men i
is
no he o al a iabili y
o
he
e u n which
is
o
pa amoun impo ance bu a he he co-
a iabili y
o
co-mo emen
o
he secu i y wi h all o he
secu i ies a ailable o he in es o (Sha pe,
1964:
425-442).
Thus he isk measu es p esen ed in Tables I and 2, while
o
in e es , may be misleading in ha hey indica e o al isk
and no sys ema ic isk. The ables he e o e
gi e
no indica ion
as o which o eign secu i ies would p o ide he bes di e si i-
ca ion oppo uni ies o a Sou h A ican in es o .
To
measu e
sys ema ic isk co ec ly,
we
would equi e a wo ld-wide so
commodi y, me als, and secu i ies index. Un o una ely such
an index does no exis .
Howe e , using he s a is ical echnique
o
mul idimensional
scaling
(K uskal,
1964a:
1-27
and
1964b:
115-129) a pic o al
ep esen a ion
o
he co-mo emen be ween a numbe
o
in es men al e na i es can be ob ained. Mo e o mally, i can
be said ha he echnique
o
mul idimensional scaling can be
used
o display he p ice se ies
o
a secu i y h ough ime as
a single poin in wo-dimensional space. When his
is
done o
a numbe
o
such p ice se ies a map
o
he poin s, as well
as hei p oximi ies, dis ances, and g oupings can be ob ained
(G eenac e and Unde hill,
1982:
183
-
268).
Clea ly he close
he poin s, he g ea e he deg ee
o
hei co-mo emen
and
hence, he
less
hei di e si ica ion po en ial when held oge he
in a po olio.
A scaling
o
he
24
secu i ies o he en i e 180-mon h
pe iod co e ed by he da a
is
p esen ed in Figu e I . This
scaling was de i ed om using he co ela ion be ween he
p ice se ies
o
each pai
o
secu i es as a measu e
o
he
simila i y be ween he secu i ies. As men ioned abo e, he
close wo poin s in he plo , he highe hei deg ee
o
co-
mo emen . Con e sely, poin s a apa ep esen good
•
Zinc
Suga
•
S.-A .
lydsk . Bed y sl.
198S,
16(2)
di e si ica ion oppo uni ies.
I will be no iced ha any mo emen owa ds he
igh -
hand side
o
he plo implies
an
inc easing likeness o
Sou h
A ican secu i ies. In he le hal
o
he plo
lie
all he
me als
so commodi ies,
and
o eign exhanges, while all he
Sou h
A ican secu i ies
lie
in
he igh hal
o
he display.
Excep ions
a e he SA gold sha es
and
he
SA
coal sha es. The
o me
a e p obably mo e closely ela ed
o
he p ice
o
gold
and
o he p ecious me als
han
o
o he Sou h A ican
sha es,
while he la e migh be e lec ing a dependance on
expo s
- ha is, wo ld-wide a he
han
Sou h A ican
in luences.
The e appea s o be a endency o inc easing liquidi y
and
du abili y
o
he secu i ies in ques ion om he op o
he
bo om
o
he display. Thus he wo ld's s ock exchanges
( he
mos liquid
o
he asse s unde s udy) which a e ep esen ed
by indices
on
he NYSE, LSE,
and
JSE appea
in
he
op
hal
o
he display. An excep ion
is
he SA gold sha es
bu
hese a e e y dependen
on
he gold p ice as
discussed
abo e.
The
me als, which a e less liquid, a e all si ua ed close o
he
ho izon al
axis
o
he display (wi h he excep ion
o
zinc).
The
so commodi ies
lie
in he bo om hal
o
he display,
and
hese a e he leas liquid
o
all he secu i ies conside ed.
A sha e
o
s ock
o
a company
is
conside ed
as
a pe pe ui y,
and
will only cease
o
exis i he company ceases o
exis .
Thus sha es a e ex emely du able in es men s, and a e
mainly
in he op hal
o
he display.
On
he o he hand he
so
commodi ies a e
o
sho du abili y, and hence a e posi ioned
in he bo om hal
o
he display.
I will be seen ha 'clus e loops' ha e been a bi a ily
inse ed
o
g oup a ious secu i ies acco ding o ype
(e.g.
p ecious me als, so commodi ies, e c). These loops
se e
o
indica e ha he wo o eign s ock exchanges conside ed
•
SA Financial
• SA Diamond
•
SA Indus ial
•
SA Me als & Mine als
• SA Mining Financial
Flp e
1 A mul idimensional scaling
o
24
secu i ies and commodi ies

S.
A .
J.
Bus. Mgm . 1985, 16(2)
(NYSE
and LSE) ended
o
show simila p ice mo emen s o
one
ano he , bu hese mo emen s we e no bigly co ela ed
wi h
he o he secu i ies conside ed. Likewise he so
commodi ies (wi h he excep ion
o
suga ) a e e y igh ly
g ouped, indica ing simila i y wi hin he g oup. These
secu i ies a e posi ioned a away om all Sou h A ican
secu i ies, indica ing low
o
e en nega i e co ela ion wi h
hese
secu i ies.
The
same applies
o
he g oup
o
indus ial
me als
consis ing
o
nickel, an imony, in
and
aluminium,
al hough in his case he
Sou h
A ican in es o could ha e
go
close o his ma ke by in es ing in he coal sec o
o
he
JSE.
I
is
well-known ha he isk
o
a po olio can be educed
by
in es ing in secu i ies which ha e low
o
nega i e co ela-
ion wi h one ano he .
F om
he abo e
i
becomes clea ha
he addi ion
o
so commodi ies
o
indus ial me als
o
a
Sou h A ican in es o 's po olio will se e o educe he isk
wi hin he po olio. The wo o eign s ock exchanges we e
shown o ha e p oduced small annual e u ns ela i e o he
o he secu i ies conside ed (Table 2) wi h ela i ely high isks,
bu om Figu e 1 i
is
clea
ha
hei p ice mo emen s did
no beha e like any
o
he o he secu i ies conside ed
and
hence
hey would p o ide isk educ ion oppo uni ies o he
Sou h A ican in es o .
Conclusion
The esul s p esen ed in his a icle indica e some
o
he isk
and he e u n bene i s which would ha e been possible o
Sou h A ican in es o s o e he pe iod
1965
-1980 had
exchange con ol es ic ions no been in ope a ion. In
pa icula h ee impo an conclusions eme ge.
Fi s ly, in e ms
o
e u n only, he Sou h A ican in es o
has
been
well
se ed by he
JSE
wi h only sil e , gold, suga ,
and pla inium p o iding clea ly supe io e u ns o e he
15-yea pe iod.
91
Secondly, because he exchange a e luc ua iom
o
he
and
o he dolla and he pound end o be coun e o majo
mo emen s in he commodi y ma ke s,
i
would appea ha
Sou h
A ican
in es o s ha e
les.s
o al
isk
when
holding
hese
commodi ies
in
compa ison wi h in es o s holding he com-
modi y in he coun ies in which he ma ke s a e ac ually
si ua ed. Thus, o example, he Sou h A ican in es o
has
less
o al isk when in es ing in sil e on he London Me al
Exchange han does a
UK
in es o .
Finally, in e ms
o
di e si iable oppo uni ies, he Sou h
A ican in es o would be bes se ed by looking o o eign
s ock exchanges and he so commodi ies ma ke s. While he
me al exchanges do o e high e u n, much
o
his mo emen
can be mi o ed by Sou h A ican in es o s h ough he
Me als and Mine als Sec o
o
he JSE. They he e o e o e
limi ed di e si ica ion oppo uni ies.
Re e ences
De
Loo , J.
1983.
Quo ed in Exchange Con ol going
in
mon hs
Business
Times
supplemen o he
Sunday
Times,
12 h June,
1983.
G eenac e, M.J. & Unde hill, L.G.
1982.
Scaling
a
da a
ma ix
in
a
low-dimensional
enclidean
space.
In Topics
In
Applied
Mul i a ia e Analysis (Ed) D.M. Hawkins, Camb idge
Uni e si y P ess,
183-
268.
K uskal, J .8.
1964a.
Mul idimensional scaling
by
op imizing
goodness-o - i o a non-me ic hypo hesis.
Psychome ika,
ol.
29,
1-27.
K uskal, J.B.
1964b.
Non-me ic mul idimensional scaling: A
nume ical me hod.
Psychome ika,
ol.
29,
115
-
129.
Sha pe, W.F.
1964.
Capi al asse p ices: A heo y
o
ma ke
equilib ium unde condi ions
o
isk.
J.
Finance,
ol.
19,
425-442.
Solnik,
B.
& Noe zlin,
B.
1983.
Op imal
In e na ional
Ass-e
Alloca ion. Rep in ed
in
Be ns ein, P .L. (Ed). In e na ional
In es ing. Ins i u ional In es o
Books.