Market sentiment and price dynamics in weak markets: A comprehensive empirical analysis of the soybean meal option market

Abstract

This study addresses key issues of market efficiency in weak global futures markets, focusing on the intricate relationship between market sentiment and options pricing. Employing rolling variance ratio tests and information-sharing models for market dynamics analysis, and supplemented with Granger causality tests and impulse response findings, it reveals a significant, unidirectional impact of market sentiment on options pricing, especially during periods of heightened sentiment. These insights underscore the importance of considering time dynamics in market behavior analysis, offering a novel perspective on futures and options market understanding.