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Time-varying tail risk in BRIC stock markets under global shocks: An ADCC-based approach

Author

Listed:
  • Chin Wen Cheong

    (Universiti Tunku Abdul Rahman, Malaysia and Sunway University, Malaysia)

  • Min Lim

    (Xiamen University Malaysia)

  • Wong Voon Hee

    (UTAR)

Abstract

This study develops a robust market risk framework for BRIC portfolios navigating heightened global uncertainty. By applying the Bai-Perron test, multiple breakpoints emerged within the volatility series, particularly during the COVID-19 pandemic. The inclusion of breakpoint dummy variables into a rolling-window GARCH model was found to be statistically insignificant, impling that rolling estimation sufficiently captures regime shifts autonomously. Using a standard ADCC-GARCH estimation, the results show that BRIC markets exhibit strong volatility persistence, heavy tails, and stable long-run correlations. The portfolio optimization for the subsequent period after 2022 reveals China and India as dominant time-varying allocation drivers during the Russia-Ukraine conflict. Finally, dynamic VaR and ES forecasts, validated by conservative yet statistically reliable backtest results, indicate that the proposed ADCC-GARCH framework accurately quantifies severe tail risk in shock-prone emerging markets.

Suggested Citation

  • Chin Wen Cheong & Min Lim & Wong Voon Hee, 2026. "Time-varying tail risk in BRIC stock markets under global shocks: An ADCC-based approach," Economics Bulletin, AccessEcon, vol. 46(3), pages 1266-1283.
    • Handle: RePEc:ebl:ecbull:eb-26-00414
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    File URL: http://www.accessecon.com/Pubs/EB/2026/Volume46/EB-26-V46-I3-P103.pdf
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    JEL classification:

    • C1 - Mathematical and Quantitative Methods - - Econometric and Statistical Methods and Methodology: General
    • G1 - Financial Economics - - General Financial Markets

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