Brian Kantor

A criterion for comparing and selecting batsmen in limited overs cricket

The batting average statistic has been used almost exclusively to assess the worth of a batsman. It reveals a great deal about the potential performance of batsmen in cricket played at the first class level. However, in the one-day game, strict limits on the number of balls bowled have introduced a very important additional dimension to performance. In the one-day game, it is clearly not good enough for a batsman to achieve a high batting average with a low strike rate. Runs scored slowly, even without the loss of wickets, will generally result in defeat rather than victory in the one-day game. Assessing batting performance in the one-day game, therefore, requires the application of at least a two-dimensional measurement approach because of the time dimension imposed on limited overs cricket. In this paper, we use a new graphical representation with Strike rate on one axis and the Probability of getting out on the other, akin to the risk–return framework used in portfolio analysis, to obtain useful, direct and comparative insights into batting performance, particularly in the context of the one-day game. Within this two-dimensional framework we develop a selection criterion for batsmen, which combines the average and the strike rate. As an example of the application, we apply this criterion to the batting performances of the 2003 World Cup. We demonstrate the strong and consistent performances of the Australian and Indian batsmen as well as provide a ranking of batting prowess for the top 20 run scorers in the tournament.

Price earnings ratios on the Johannesburg Stock Exchange - Are they a guide to value?

This paper tests whether there is an equilibrium relationship between prices and earnings on the Johannesburg Stock Exchange (JSE). Such a relationship would hold if the JSE Index and index earnings were cointegrated, A full explanation of the technique of cointegration is provided. It is shown that prices and earnings on the JSE are not cointegrated, which is aconsistent with similar results obtained for the New York Stock Exchange. The paper then offers a more general explanation of prices on the JSE to include, in addition to earnings, the influence of world markets and political and exchange rate risk, on the value of the JSE as represented by its Industrial and Financial Index. It is found that the variables of these models of the JSE are in fact cointegated. This means that there have been forces driving long term equilibrium values on the JSE. Movements away from such equilibrium values have represented market beating opportunities Current prices are thus not the best estimate of future prices, sug...

The Discount to Net Asset Value, Unbundling and Shareholder Interests

The argument has recently been made by powerful political voices that the large South African corporate conglomerates (or groups) should be broken up into their constituents or “unbundled”, as the process has become known in South Africa. Critics of these groups in the financial markets have pointed to the existence of a discount of the quoted share price to the so-called Net Asset value of the Mining Finance houses, which are either the parent companies of the groups or constitute an Important element of them. Unbundling, it is contended, will “unlock” value for shareholders by eliminating this discount. This paper examines the notion of a discount to Net Asset value and shows why such claims about unlocking value are largely unfounded.

The Beliefs of Central Bankers About Inflation and the Business Cycle—and Some Reasons to Question the Faith

Although the U.S. Fed has recently created trillions of dollars through its purchases of Treasury Bonds and other securities, this has not had the usual inflationary consequences. The lesson from this experience is that inflation results from an increase in the supply of money over and above the demand to hold money. And this in turn implies that to be effective, any forecasting model of inflation, whether run inside or outside the Fed, must be provided with accurate estimates of the demand for as well as the supply of money, which is a formidable task given the extraordinary stock of excess over required cash reserves now held by U.S. banks. Unlike the approach of the U.S. Fed, the monetary policy of South Africas Reserve Bank does not appear to distinguish between the more or less temporary effects of supply-side shocks on inflation, such as those stemming from a weakening of the currency, from changes in the relatively permanent demand-side forces that drive prices higher or lower. Instead of ignoring such supply-side shocks, as Fed Chair Yellen has counselled the Fed to do, the Resbank has reacted to higher prices of whatever provenance in the same way, raising or lowering interest rates accordingly. This has made its policies highly pro-cyclical in an economy subject to dramatic exchange rate shocks that are independent of monetary policy settings. But if the U.S. Fed has been right to ignore the effects of its policies on changes in the U.S. dollar, it has introduced another source of uncertainty. By postulating that only unexpected inflation is capable of stimulating economic activity, the Fed model makes a strong case for the benefits of highly consistent and predictable, central bank-influenced expectations of low inflation in maintaining economic growth and employment. But for all the wisdom of this policy, the Fed also appears to persist in believing in its own ability to engineer inflation surprises, with the intent of managing the business cycle. Experience tells us that such attempts at fine-tuning are almost certain to prove not only futile, but also incompatible with the Feds own goals of predictable policy actions and reactions. These contradictions about the role that expectations and Fed-watching play in the economy lead toward a different policy prescription: namely, reliance upon monetary policy rules rather than policy discretion to minimize inflation and other surprises.

Portfolio strategies for hedging against rand weakness

This paper considers how portfolios may be structured which provide protection against Rand exchange rate movement and, in particular, against Rand weakness. Two portfolio optimisation methods are used to estimate the portfolio weights of the Top 40 shares listed on the Johannesburg Stock Exchange (JSE) which provide the maximum protection against some pre-defined expectation of Rand weakness. The performance of these Rand-hedge portfolios is then compared to that of the Itrix FTSE 100 Exchange Traded fund (ETF) which mimics the London-based FTSE 100. While the portfolios based on the JSE Top 40 components provide slightly less Rand hedge protection than the Itrix FTSE 100 ETF, they are still able to provide a very effective exchange rate hedge. Moreover, they are also able to provide greater exposure to the South African market and this has resulted in a significant performance advantage over the Itrix FTSE 100 over the last five years.

Adding market value to a holding company

The paper explains the forces that determine changes in the discount of Net Asset market value of the typical JSE listed holding company. It is demonstrated that a variety of events which will alter the discount automatically may have very little value to add for shareholders. Nevertheless the discount itself may reveal scepticism about the ability of the holding company to undertake value adding investments. Therefore unbundling may signal that the holding company is less likely to pursue such value destroying investments. If so the discount will narrow and the holding company will have added value for its shareholders.

On Freedom and Free Enterprise in South Africa

This paper questions Wassenaars analysis of the ‘financial crisis in South Africa’. It examines the important differences which Wassenaar ignores between 1972–1974 when government revenue rose substantially relative to government expenditure and the period after that when the fiscal deficit rose so substantially. The review considers that Wassenaar has failed to provide any convincing explanation of why government has grown in South Africa. An alternative explanation is offered that draws on the emerging economic analysis of political action. The review then goes on to examine the recent South African Insurance Commission report to see how well opinion in Dr. Wassenaars own industry accords with the principles of free enterprise. It finds that even in his own industry attachment to competitive principles is highly ambiguous.