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Economic Performance and Stock Market Integration in BRICS and G7 Countries: An Application with Quantile Panel Data and Random Coefficients Modeling

Author

Listed:
  • José Clemente Jacinto Ferreira

    (Department of Management and Economics, Universidade da Beira Interior, 2635-434 Rio de Mouro, Portugal)

  • Ana Paula Matias Gama

    (Department of Management and Economics, Universidade da Beira Interior, 6200-209 Covilhã, Portugal)

  • Luiz Paulo Fávero

    (School of Economics, Business and Accounting, University of São Paulo, Cidade Universitária, São Paulo 05508-900, SP, Brazil)

  • Ricardo Goulart Serra

    (INSPER and FECAP, Vila Olímpia 04546-042, SP, Brazil)

  • Patrícia Belfiore

    (Engineering, Modeling and Applied Social Science Center, Federal University of ABC, São Bernardo do Campo 09606-045, SP, Brazil)

  • Igor Pinheiro de Araújo Costa

    (Operational Research Department, Naval Systems Analysis Centre (CASNAV), Rio de Janeiro 20091-000, RJ, Brazil)

  • Marcos dos Santos

    (Systems and Computing Department, Military Institute of Engineering (IME), Urca 22290-270, RJ, Brazil)

Abstract

The interest in studies aimed at understanding the integration of the stock market with the economic performance of countries has been growing in recent years, perhaps driven by the recent economic crises faced by the world. Although several studies on the topic have been carried out, the results are still far from a meaningful conclusion. In this sense, this paper considered the dual objective of investigating whether there is significant variance in the economic performance of developed and emerging markets’ countries and whether the global risk factors are statistically significant in explaining the variations in their future economic performance over time. From a sample of (i) gross domestic products from BRICS and G7 countries (total of twelve countries), and (ii) returns of the risk factors of developed and emerging stock markets for the period 1993 to 2019, we applied longitudinal regression modeling for five distinct percentiles, and random coefficients modeling (RCM) with repeated measures. We found that risk factors explain the future economic performance, there is significant variation in economic performance over time among countries, and the temporal variation in the random effects of intercepts can be explained by RCM. The results of this study confirm that stock markets follow an integration process and that moderately integrated markets may have the same risk factors. Furthermore, considering that risk factors are related to future GDP growth, they act as proxies for unidentified state variables.

Suggested Citation

  • José Clemente Jacinto Ferreira & Ana Paula Matias Gama & Luiz Paulo Fávero & Ricardo Goulart Serra & Patrícia Belfiore & Igor Pinheiro de Araújo Costa & Marcos dos Santos, 2022. "Economic Performance and Stock Market Integration in BRICS and G7 Countries: An Application with Quantile Panel Data and Random Coefficients Modeling," Mathematics, MDPI, vol. 10(21), pages 1-35, October.
    • Handle: RePEc:gam:jmathe:v:10:y:2022:i:21:p:4013-:d:956924
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    References listed on IDEAS

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