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Do global factors impact BRICS stock markets? A quantile regression approach

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  • Walid Mensi
  • Shawkat Hammoudeh
  • Juan Carlos Reboredo
  • Duc Khuong Nguyen

Abstract

This paper examines the dependence structure between the emerging stock markets of the BRICS countries (Brazil, Russia, India, China and South Africa) and influential global factors (the S&P 500 index, the commodity markets, the global stock market uncertainty and the US economic policy uncertainty). Using the quantile regression approach, our results for the period from September 1997 to September 2013 show that the BRICS stock markets exhibit asymmetric dependence with the global stock market and this dependence has not changed since the onset of the recent global financial crisis. Moreover, oil prices display a symmetric tail independence with all those BRICS markets (except that of South Africa), even though the dependence between oil and BRICS markets significantly increased with the onset of the financial crisis. The gold price returns co-move with those of the BRICS markets at both the upper and lower tails (except for Russia and China) but the degree of comovement has decreased since the crisis. Finally, the stock market uncertainty (VIX) is found to drive the stock returns in a bear market but this relationship is insignificant in a bull market. On the other hand, the economic policy uncertainty has no impact on the BRICS stock markets both before and since the onset of the financial crisis. These results have implications for international investors in terms of risk management which should vary according to changes in the economic and financial global factors.

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Bibliographic Info

Paper provided by Department of Research, Ipag Business School in its series Working Papers with number 2014-159.

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Length: 36 pages
Date of creation: 25 Feb 2014
Date of revision:
Handle: RePEc:ipg:wpaper:2014-159

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Keywords: Asymmetric dependence; global factors; BRICS; global financial crisis; quantile regression.;

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