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

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.