Does Options Bolster Capital Markets in South Africa?

Mahlatse Mabeba ()
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Mahlatse Mabeba: South African Institute of Financial Markets

Journal of Economics and Financial Analysis, 2025, vol. 9, issue 1, 1-22

Abstract: This study examines the impact of option on South African’s capital markets over the period 1991–2020. Using put–call open interest ratios (PCOIR) and put–call volume ratios (PCVR), we test whether option sentiment provides predictive signals beyond conventional macro-financial variables. Applying quantile regression with robustness checks for asymmetry, regime dependence, and macro-financial interactions, we find that option sentiment significantly predicts equity and bond returns, with bearish signals exerting stronger effects than bullish ones. The predictive influence intensifies during periods of heightened volatility and financial stress, and its strength varies with liquidity conditions and monetary policy stance. Overall, the findings show that option sentiment is both a reflection of investor expectations and a driver of asset price dynamics, underscoring its informational role in South Africa’s capital markets.

Keywords: Options; Capital Markets; Quantile Regression; South Africa. (search for similar items in EconPapers)
JEL-codes: C32 G12 G23 (search for similar items in EconPapers)
Date: 2025
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Persistent link: https://EconPapers.repec.org/RePEc:trp:01jefa:jefa0082

DOI: 10.1991/jefa.v9i1.a74

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