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The spillover effects of the sub-prime mortgage crisis and optimum asset allocation in the BRICV stock markets

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  • Chiang, Shu-Mei
  • Chen, Hsin-Fu
  • Lin, Chi-Tai

Abstract

In the aftermath of the sub-prime mortgage crisis, we set out to investigate the spillover effects of returns and volatility in the US stock market on the stock markets of Brazil, Russia, India, China and Vietnam (BRICVs). The results of our application of the ARJI (autoregressive conditional jump intensity) model reveal that the greatest contagious effects of returns and volatility from the US market before the crisis were felt by Russia; however, following the crisis, the most intense spillover effects are found to be on Vietnam. While India, the most efficient of these markets, demonstrates the lowest total long-run risk, an inverse situation is discernible for both China and Brazil. Our results therefore suggest that in the design of their asset allocation strategies, investors with risk aversion should consider investing greater proportions of their funds in India, while being conservative in both Brazil and China to avoid inefficient and risky investment.

Suggested Citation

  • Chiang, Shu-Mei & Chen, Hsin-Fu & Lin, Chi-Tai, 2013. "The spillover effects of the sub-prime mortgage crisis and optimum asset allocation in the BRICV stock markets," Global Finance Journal, Elsevier, vol. 24(1), pages 30-43.
    • Handle: RePEc:eee:glofin:v:24:y:2013:i:1:p:30-43
    DOI: 10.1016/j.gfj.2013.03.001
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    References listed on IDEAS

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    10. William Cheung & Scott Fung & Shih-Chuan Tsai, 2010. "Global capital market interdependence and spillover effect of credit risk: evidence from the 2007-2009 global financial crisis," Applied Financial Economics, Taylor & Francis Journals, vol. 20(1-2), pages 85-103.
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    Cited by:

    1. Shawkat Hammoudeh & Sang Hoon Kang & Walid Mensi & Duc Khuong Nguyen, 2016. "Dynamic Global Linkages of the BRICS Stock Markets with the United States and Europe Under External Crisis Shocks: Implications for Portfolio Risk Forecasting," The World Economy, Wiley Blackwell, vol. 39(11), pages 1703-1727, November.
    2. Usman M. Umer, Metin Coskun, Kasim Kiraci, 2018. "Time-varying Return and Volatility Spillover among EAGLEs Stock Markets: A Multivariate GARCH Analysis," Journal of Finance and Economics Research, Geist Science, Iqra University, Faculty of Business Administration, vol. 3(1), pages 23-42, March.
    3. Viorica Chirilă & Ciprian Chirilă, 2020. "Asymmetric Return and Volatility Transmission in Euro Zone and Baltic Countries Stock Markets," Ovidius University Annals, Economic Sciences Series, Ovidius University of Constantza, Faculty of Economic Sciences, vol. 0(2), pages 2-11, December.
    4. Zheng, Qingying & Wu, Jintao & Lin, Boqiang, 2025. "Performance of systemic stress in agricultural commodities and its implication for volatility prediction in SSA equities," Journal of Commodity Markets, Elsevier, vol. 39(C).
    5. Mensi, Walid & Hammoudeh, Shawkat & Nguyen, Duc Khuong & Kang, Sang Hoon, 2016. "Global financial crisis and spillover effects among the U.S. and BRICS stock markets," International Review of Economics & Finance, Elsevier, vol. 42(C), pages 257-276.
    6. Alotaibi, Abdullah R. & Mishra, Anil V., 2015. "Global and regional volatility spillovers to GCC stock markets," Economic Modelling, Elsevier, vol. 45(C), pages 38-49.
    7. Gagan Sharma & Parthajit Kayal & Piyush Pandey, 2019. "Information Linkages Among BRICS Countries: Empirical Evidence from Implied Volatility Indices," Journal of Emerging Market Finance, Institute for Financial Management and Research, vol. 18(3), pages 263-289, December.
    8. Slim Mseddi & Noureddine Benlagha, 2017. "An Analysis of Spillovers Between Islamic and Conventional Stock Bank Returns: Evidence from the GCC Countries," Multinational Finance Journal, Multinational Finance Journal, vol. 21(2), pages 91-132, June.
    9. Hammoudeh, Shawkat & Kang, Sang Hoon & Mensi, Walid & Nguyen, Duc Khuong, 2014. "Dynamic global linkages of the BRICS stock markets with the U.S. and Europe under external crisis shocks: Implications for portfolio risk forecasting," MPRA Paper 73400, University Library of Munich, Germany, revised Mar 2016.
    10. Noureddine Benlagha & Slim Mseddi, 2019. "Return and volatility spillovers in the presence of structural breaks: evidence from GCC Islamic and conventional banks," Journal of Asset Management, Palgrave Macmillan, vol. 20(1), pages 72-90, February.

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    JEL classification:

    • C4 - Mathematical and Quantitative Methods - - Econometric and Statistical Methods: Special Topics
    • G1 - Financial Economics - - General Financial Markets
    • G15 - Financial Economics - - General Financial Markets - - - International Financial Markets
    • G34 - Financial Economics - - Corporate Finance and Governance - - - Mergers; Acquisitions; Restructuring; Corporate Governance

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