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Return, volatility spillovers and dynamic correlation in the BRIC equity markets: An analysis using a bivariate EGARCH framework

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  • Bhar, Ramaprasad
  • Nikolova, Biljana
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    Abstract

    This paper examines the level of integration and the dynamic relationship between the BRIC countries, their respective regions and the world. We find that India shows the highest level of regional and global integration among the BRIC countries, followed by Brazil and Russia and lastly by China. There is a negative relationship between the location conditional volatility of India with that of the Asia-Pacific region and of China with the world, which indicates a presence of diversification opportunities for portfolio investors. Portfolio investors can continue to receive sound returns from taking positions in the index of these countries, however for an outstanding investment performance, they should consider investing in specific areas of growth within the economy rather than the country index.

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    Bibliographic Info

    Article provided by Elsevier in its journal Global Finance Journal.

    Volume (Year): 19 (2009)
    Issue (Month): 3 ()
    Pages: 203-218

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    Handle: RePEc:eee:glofin:v:19:y:2009:i:3:p:203-218

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    Web page: http://www.elsevier.com/locate/inca/620162

    Related research

    Keywords: Volatility spillover Dynamic correlation BRIC Market integration;

    References

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    1. Aggarwal, Reena & Inclan, Carla & Leal, Ricardo, 1999. "Volatility in Emerging Stock Markets," Journal of Financial and Quantitative Analysis, Cambridge University Press, vol. 34(01), pages 33-55, March.
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    4. Geert Bekaert & Campbell R. Harvey & Christian T. Lundblad, 2003. "Equity market liberalization in emerging markets," Review, Federal Reserve Bank of St. Louis, issue Jul, pages 53-74.
    5. Graciela L. Kaminsky & Sergio L. Schmukler, 1999. "What triggers market jitters: a chronicle of the Asian crisis," International Finance Discussion Papers 634, Board of Governors of the Federal Reserve System (U.S.).
    6. Taimur Baig & Ilan Goldfajn, 2000. "The Russian Default and the Contagion to Brazil," IMF Working Papers 00/160, International Monetary Fund.
    7. de Jong, Frank & de Roon, Frans, 2001. "Time-Varying Market Integration and Expected Returns in Emerging Markets," CEPR Discussion Papers 3102, C.E.P.R. Discussion Papers.
    8. Kui-Wai Li & Tung Liu, 2001. "Financial Liberalisation and Growth in China's Economic Reform," The World Economy, Wiley Blackwell, vol. 24(5), pages 673-687, 05.
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    10. Nelson, Daniel B, 1991. "Conditional Heteroskedasticity in Asset Returns: A New Approach," Econometrica, Econometric Society, vol. 59(2), pages 347-70, March.
    11. Ito, Hiro, 2006. "Financial development and financial liberalization in Asia: Thresholds, institutions and the sequence of liberalization," The North American Journal of Economics and Finance, Elsevier, vol. 17(3), pages 303-327, December.
    12. Ng, Angela, 2000. "Volatility spillover effects from Japan and the US to the Pacific-Basin," Journal of International Money and Finance, Elsevier, vol. 19(2), pages 207-233, April.
    13. Bae, Kee-Hong & Andrew Karolyi, G., 1994. "Good news, bad news and international spillovers of stock return volatility between Japan and the U.S," Pacific-Basin Finance Journal, Elsevier, vol. 2(4), pages 405-438, December.
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    Cited by:
    1. Erten, Irem & Tuncel, Murat B. & Okay, Nesrin, 2012. "Volatility Spillovers in Emerging Markets During the Global Financial Crisis: Diagonal BEKK Approach," MPRA Paper 56190, University Library of Munich, Germany.
    2. Chiang, Shu-Mei & Chen, Hsin-Fu & Lin, Chi-Tai, 2013. "The spillover effects of the sub-prime mortgage crisis and optimum asset allocation in the BRICV stock markets," Global Finance Journal, Elsevier, vol. 24(1), pages 30-43.
    3. Faten Ben Slimane & Mohamed Mehanaoui & Irfan A. Kazi, 2014. "Interdependency and Spillover during the Financial Crisis of 2007 to 2009 – Evidence from High Frequency Intraday Data," Working Papers 2014-126, Department of Research, Ipag Business School.
    4. Gilenko, Evgenii & Fedorova, Elena, 2014. "Internal and external spillover effects for the BRIC countries: Multivariate GARCH-in-mean approach," Research in International Business and Finance, Elsevier, vol. 31(C), pages 32-45.

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