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Dynamic connectedness between oil shocks and BRICS stock markets

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  • Mensi, Walid
  • Khoury, Rim El
  • Kang, Sang Hoon

Abstract

This study explores the dynamic relationships between oil shocks and the BRICS stock markets (Brazil, Russia, India, China, and South Africa) using a novel R2 decomposed connectedness framework to quantify both contemporaneous and lagged spillovers. It differentiates between the immediate and delayed effects of demand, supply, and risk-driven shocks. Our findings show that total connectedness is heterogeneous over time and dependent on economic events, with contemporaneous effects more pronounced on average. Risk shocks emerged as primary volatility transmitters during global crises such as the COVID-19 pandemic, influencing markets almost immediately. Lagged spillovers are observed, indicating delayed market responses to the initial shocks. The role of BRICS nations as net receivers or transmitters is shaped by their economic characteristics and shocks. This study highlights the need for tailored policy responses to manage the impact of oil price volatility on emerging markets, considering both immediate and long-term effects.

Suggested Citation

  • Mensi, Walid & Khoury, Rim El & Kang, Sang Hoon, 2025. "Dynamic connectedness between oil shocks and BRICS stock markets," Finance Research Letters, Elsevier, vol. 82(C).
    • Handle: RePEc:eee:finlet:v:82:y:2025:i:c:s1544612325008608
    DOI: 10.1016/j.frl.2025.107601
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    JEL classification:

    • C50 - Mathematical and Quantitative Methods - - Econometric Modeling - - - General
    • G14 - Financial Economics - - General Financial Markets - - - Information and Market Efficiency; Event Studies; Insider Trading
    • G15 - Financial Economics - - General Financial Markets - - - International Financial Markets
    • Q43 - Agricultural and Natural Resource Economics; Environmental and Ecological Economics - - Energy - - - Energy and the Macroeconomy

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