Stochastic Investment Modelling: The Case of South Africa

The purpose of this paper is to describe a methodology for determining an appropriate structure for time-series models of inflation rates, short-term and long-term interest rates, dividend growth rates, dividend yields, rental growth rates and rental yields and to demonstrate the application of that methodology to the development of a model based on South African data. It is suggested that the methodology used in this paper may be applied to other economic environments.