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Analyzing Spillover Effects Among BRICS Stock Markets: Application of Copula and DCC-MGARCH Model

Author

Listed:
  • Naliniprava Tripathy

    (Indian Institute of Management, Shillong, Meghalaya, 793014, India)

  • Pradiptarathi Panda

    (National Institute of Securities Markets (NISM), Plot No IS 1 & 2, Rasayani, Mohpada, 410222, Maharashtra)

Abstract

This study examines the nonlinear dependence and tail dependence of BRICS countries’ stock markets and the contagion effect among Brazil, Russia, India, China, and South Africa (BRICS) countries’ daily stock markets using the COPULA model from January 2000 to February 2019. The study employs the DCC-MGARCH model and Diebold and Yilmaz volatility spillover model to assess the interdependence dynamics across BRICS countries’ stock markets. The copula results suggest that the BRICS country’s stock markets are independent of each other. The conditional correlation between BRICS is negative and statistically significant, suggesting that the negative relationship among BRICS is an important signal for international investors to diversify among these countries and get the economic value of their investment. Further, Brazil, China, and South Africa are the net volatility transmitter, at the same time India and Russia are the net volatility receiver during the study period. The study proposes that policymaker of BRICS needs to interchange views and mutually map policies to appeal to global investment more.

Suggested Citation

  • Naliniprava Tripathy & Pradiptarathi Panda, 2023. "Analyzing Spillover Effects Among BRICS Stock Markets: Application of Copula and DCC-MGARCH Model," Review of Pacific Basin Financial Markets and Policies (RPBFMP), World Scientific Publishing Co. Pte. Ltd., vol. 26(04), pages 1-24, December.
    • Handle: RePEc:wsi:rpbfmp:v:26:y:2023:i:04:n:s0219091523500236
    DOI: 10.1142/S0219091523500236
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