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

Author

Listed:
  • Bhar, Ramaprasad

    (The University of New South Wales)

  • Nikolova, Biljana

    (The University of New South Wales)

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.

Suggested Citation

  • Bhar, Ramaprasad & Nikolova, Biljana, 2007. "Analysis of Mean and Volatility Spillovers Using BRIC Countries, Regional and World Equity Index Returns," Journal of Economic Integration, Center for Economic Integration, Sejong University, vol. 22, pages 369-381.
    • Handle: RePEc:ris:integr:0398
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    Citations

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    Cited by:

    1. Pradiptarathi Panda & Wasim Ahmad & M. Thiripalraju, 2023. "Better to Give than to Receive: A Study of BRICS Countries Stock Markets," Journal of Emerging Market Finance, Institute for Financial Management and Research, vol. 22(2), pages 164-188, June.
    2. Amanjot Singh & Parneet Kaur, 2017. "A Short Note on Information Transmissions Across US-BRIC Equity Markets: Evidence from Volatility Spillover Index," Journal of Quantitative Economics, Springer;The Indian Econometric Society (TIES), vol. 15(1), pages 197-208, March.
    3. 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).
    4. Makushkin, Mikhail & Lapshin, Victor, 2020. "Modelling tail dependencies between Russian and foreign stock markets: Application for market risk valuation," Applied Econometrics, Russian Presidential Academy of National Economy and Public Administration (RANEPA), vol. 57, pages 30-52.
    5. Mehmet ORHAN & Halil İbrahim ÇELİKEL, 2014. "The Spillover Effects of Fed’s Policies with Emphasis to the Fragile Five," Journal of Economics and Behavioral Studies, AMH International, vol. 6(12), pages 1011-1020.
    6. Constantin Gurdgiev & Conor O’Riordan, 2021. "A Wavelet Perspective of Crisis Contagion between Advanced Economies and the BRIC Markets," JRFM, MDPI, vol. 14(10), pages 1-29, October.
    7. Vlasova, E. & Luo, D., 2022. "Volatility spillover between the Russia-India-China triad and the United States: A multivariate generalized autoregressive conditional heteroscedasticity analysis," Journal of the New Economic Association, New Economic Association, vol. 54(2), pages 111-128.
    8. Abdul Wahid & Muhammad Zubair Mumtaz, 2018. "The Paradigm Shift in the Pakistan Stock Exchange’s Financial Integration Post-FTA and CPEC," Lahore Journal of Economics, Department of Economics, The Lahore School of Economics, vol. 23(1), pages 21-50, Jan-June.
    9. Amanjot Singh & Manjit Singh, 2016. "Investigating Impact of US, Europe, Frontier and BRIC Stock Markets on Indian Financial Stress Index," Journal of Banking and Financial Economics, University of Warsaw, Faculty of Management, vol. 2(6), pages 23-44, June.
    10. Saswat Patra & Pradiptarathi Panda, 2021. "Spillovers and financial integration in emerging markets: Analysis of BRICS economies within a VAR‐BEKK framework," International Journal of Finance & Economics, John Wiley & Sons, Ltd., vol. 26(1), pages 493-514, January.
    11. 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, July.
    12. Sanjay Sehgal & Payal Jain, 2017. "Information linkages among emerging equity markets—an empirical study," DECISION: Official Journal of the Indian Institute of Management Calcutta, Springer;Indian Institute of Management Calcutta, vol. 44(1), pages 15-38, March.
    13. Kocaarslan, Baris & Sari, Ramazan & Gormus, Alper & Soytas, Ugur, 2017. "Dynamic correlations between BRIC and U.S. stock markets: The asymmetric impact of volatility expectations in oil, gold and financial markets," Journal of Commodity Markets, Elsevier, vol. 7(C), pages 41-56.
    14. Avik Das & Dr. Devanjali Nandi Das, 2022. "Understanding Volatility Spillover Relationship Among G7 Nations And India During Covid-19," Papers 2208.09148, arXiv.org.
    15. Vinodh Madhavan, 2017. "How interrelated are MIST equity markets with the developed stock markets of the world?," Cogent Economics & Finance, Taylor & Francis Journals, vol. 5(1), pages 1362822-136, January.
    16. Isha Narula, 2016. "Dynamics of volatility behaviour and transmission: evidences from BRICS countries," DECISION: Official Journal of the Indian Institute of Management Calcutta, Springer;Indian Institute of Management Calcutta, vol. 43(1), pages 31-51, March.

    More about this item

    Keywords

    Volatility spillover; GARCH-in-Mean; Market integration;
    All these keywords.

    JEL classification:

    • E37 - Macroeconomics and Monetary Economics - - Prices, Business Fluctuations, and Cycles - - - Forecasting and Simulation: Models and Applications
    • G15 - Financial Economics - - General Financial Markets - - - International Financial Markets

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