Faculty of Gordon Institute of Business Science (GIBS)
Department of Graduate School of Management
Selected Highlights from Research Findings
Contact person: Prof MJD Ward.
Asset managers are either "passive" (that is, they invest in portfolio for the long term) or "active". Active managers have two basic approaches to outperforming passive buy-and-hold strategies: asset selection (that is, they buy shares that are under-rated by the market and will outperform) or market timing.
Market timing is often defined as the process of shifting the weights in portfolio constituents in accordance with expected market conditions. For example, during bull phases of the market, market-timers will increase the weighting of equities versus cash, and vice versa for bear phases. Many researchers have shown that, while the potential returns of such a strategy are attractive, the success of the market timer is dependent on her forecasting ability. Generally speaking, high levels of prediction are necessary to outperform a buy-and-hold strategy.
This research investigates a market timing strategy on the JSE related to exchange rate fluctuations in the rand. Various researchers have identified shares that react positively or negatively to exchange rate fluctuations affecting the rand. By increasing the weight of so-called "rand-hedge" shares when the rand is expected to weaken or increasing the weight of "rand-play" shares when the currency is expected to strengthen, a market-timer can enhance her returns subject to the accuracy of her currency predictions.
Using three independent sets of currency sensitive shares, this research examines the risk and return outcomes on the JSE that would have been experienced by market-timers for different levels of predictive accuracy over the period October 1998 to October 2008.
The results show that exceptional returns, in excess of 35% per annum above the benchmark, can be obtained, depending on forecasting ability. To be certain of outperforming the benchmark, a forecasting accuracy for the rand of around 70% is required, which is difficult to obtain. Even with considerably lower forecasting ability, it is possible to outperform a benchmark following this strategy.
These findings indicate that while similar levels of forecasting accuracy are required, bigger potential returns are possible for market-timing strategies relating to currency fluctuations when compared to conventional asset-switching strategies.
Contact person: Prof MJD Ward.
With over 125 000 cases referred to the Commission for Conciliation, Mediation and Arbitration (CCMA) annually, and a recent judicial statement, it is clear that too many of the cases referred are without merit and are often referred as an attempt by a party to gain an unwarranted payout at the conclusion of an employment contract. This situation increases the administrative burden and potentially increases the cost of doing business in South Africa.
Propositions, based on international experience from three other labour dispute resolution systems and recommendations in the literature, were tested with the aid of the Delphi technique. Three rounds were conducted with experts in the field. The findings show that there are a number of interventions that, if implemented, would prevent the referral of frivolous cases to the CCMA. In implementing the interventions, the underlying principle needs to be that rights of access and use should be enhanced and not narrowed. Therefore, the interventions focusing on enhancing systems are deemed preferable to those that use exclusionary criteria.
The most prominent interventions from literature and international experience include charging referral fees, awarding costs against parties who refer frivolous cases, allowing for greater legal representation and introducing qualification criteria for referrals.
The research findings indicate that the measure most likely to achieve success in preventing frivolous cases is the implementation and management of stricter screening processes. These stricter screening processes should not only evaluate the jurisdiction of the matter, as is currently the case, but should also closely examine the merits of the cases being referred.
A second intervention likely to see a significant reduction in the referral of frivolous cases is the more frequent use of cost awards. Although cost awards should be limited to frivolous cases, they should be used more often and should be more strictly enforced.
The third measure identified as being likely to have a significant impact on the prevention of frivolous cases was increasing the powers of commissioners to dismiss cases at conciliation instead of simply issuing a certificate.
A number of other initiatives were identified as having the potential to reduce the referral of frivolous cases, but were rejected as they were viewed as limiting or reducing rights.
The research also indicates that any proposed intervention should not be viewed in isolation and that a holistic view should always be taken. Underpinning any intervention is the necessity for the broad-based education of all CCMA users. The education needs to cover the roles and responsibilities of all parties, including the penalties imposed for frivolous referrals.
Contact person: Dr A Wocke.
The enforcement of intellectual property (IP) rights is contested in developing countries. Firms in less developed countries lack the experience of effective patent regimes – or indeed patents – that will allow them to benefit from a structured IP regime, and they are also expected to pay for acquiring the technologies that would allow them to become globally competitive.
Navigating the complex process of codifying and managing IP is increasingly required in order to compete globally. Helena Barnard, a senior lecturer at GIBS, and Tracy Bromfield, a GIBS MBA alumna and Manager of Applied Research at Sasol, jointly conducted a series of studies to investigate how Sasol has learnt the value and process of patenting and other forms of IP.
They point out that the capability to create IP is not the same as the capability to manage it. Sasol had patents long before the firm understood how to extract the full value from those patents. Barnard and Bromfield document how Sasol’s current IP management strategy evolved through trial-and-error learning.
The evidence from their work suggests that patents are very seldom used simplistically to protect a given technology. Rather, IP is often used as a “bargaining chip” to gain access to the knowledge of others, whether formally, for example, through cross-licensing, or informally, for example, by gaining invitations to relevant conferences on the basis of a reputation for competence. This very social (rather than technical) use of patents is complicated by the fact that competitors are the most likely to have helpful technologies. Managing the tension between cooperation and competition is at the heart of managing IP. In addition, there is a local/global tension, because many of Sasol’s closest collaborators are located abroad rather than locally.
They conclude that firms need to understand what they want to achieve with their IP – that is, develop a clear IP strategy – in order to make effective decisions about whether, when and how to formalise their IP, ideally even before they start to patent their inventions.
Contact person: Dr H Barnard.
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