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Analysis of Mean and Volatility Spillovers Using BRIC Countries, Regional and World Equity Index Returns

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Author Info

  • Bhar, Ramaprasad

    ()
    (The University of New South Wales)

  • Nikolova, Biljana

    (The University of New South Wales)

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    Abstract

    This paper analyses the degree of integration of the BRIC countries on a regional and global basis, achieved by using daily equity index level data. The paper concludes that a high degree of integration exists between the BRIC countries and their respective regions, and to a lesser extent, the rest of the world. Regional trends are found to have a much greater influence than world trends upon the stock return process of the BRIC countries. The world index returns, and most likely the US equity market returns, have a significant influence upon the variance of returns seen across Brazil, Russia and India. China is the only country where there exists a negative relationship between volatility spillover effects on a regional and global basis. This suggests existence of diversification opportunities for investment managers. Global portfolio managers can still add value from investments in these countries, however the increased levels of integration of these economies highlight the need for portfolio stock selection strategies as well as investment in specific growth areas within these economies, rather than taking a position in the country index.

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    Bibliographic Info

    Article provided by Center for Economic Integration, Sejong University in its journal Journal of Economic Integration.

    Volume (Year): 22 (2007)
    Issue (Month): ()
    Pages: 369-381

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    Handle: RePEc:ris:integr:0398

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    Web page: http://econo.sejong.ac.kr/
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    Related research

    Keywords: Volatility spillover; GARCH-in-Mean; Market integration;

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    Cited by:
    1. Morales, Lucía & Gassie, Esmeralda, 2011. "Structural breaks and financial volatility: Lessons from BRIC countries," IAMO Forum 2011: Will the "BRICs Decade" Continue? – Prospects for Trade and Growth 13, Leib­niz Institute of Agricultural Development in Central and Eastern Europe (IAMO).
    2. Ramaprasad Bhar & Biljana Nikolova, 2009. "Oil Prices and Equity Returns in the BRIC Countries," The World Economy, Wiley Blackwell, vol. 32(7), pages 1036-1054, 07.

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