Business Confidence Index (BCI) and Share Return Volatility Nexus: Sectorial Empirical Evidence

Zakhiyya Yousuf () and Godfrey Marozva ()
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Zakhiyya Yousuf: Department of Finance, Risk Management, and Banking, University of South Africa, Pretoria 0001, South Africa
Godfrey Marozva: Department of Finance, Risk Management, and Banking, University of South Africa, Pretoria 0001, South Africa

JRFM, 2025, vol. 18, issue 11, 1-24

Abstract: This study investigates the relationship between the Business Confidence Index (BCI) and the volatility of stock returns in South Africa using quantile regression and GARCH (1,1) models across the Financial Services, Industrial, and Resources sectors of the Johannesburg Stock Exchange. The results reveal that BCI significantly influences stock return volatility, particularly in upper quantiles, suggesting heightened sensitivity during periods of elevated market activity. Sectoral analysis using GARCH (1,1) shows that higher business confidence reduces volatility in the financial sector, exhibits a muted effect in the industrial sector, and positively correlates with volatility in the resource sector. The results underscore the asymmetric and sector-specific nature of sentiment effects. These findings support behavioural finance theories and emphasize the need for differentiated policy strategies to manage market risks in emerging economies.

Keywords: Business Confidence Index; volatility; quantile regression; South Africa; sectoral analysis (search for similar items in EconPapers)
JEL-codes: C E F2 F3 G (search for similar items in EconPapers)
Date: 2025
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