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Spillovers and contagion between BRIC and G7 markets: New evidence from time-frequency analysis

Author

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  • Samuel Kwaku Agyei
  • Peterson Owusu Junior
  • Ahmed Bossman
  • Emmanuel Asafo-Adjei
  • Oliver Asiamah
  • Anokye Mohammed Adam

Abstract

We examine the time-frequency spillovers, contagion, and pairwise interrelations between the BRIC index and its constituents, and between BRIC and G7 economies. The extent of interdependencies between market blocs and their constituents needs to be ascertained in the time-frequency domain for efficient asset allocation and portfolio management. Accordingly, the Baruník and Křehlík spillover index is employed with daily data between 11th December 2015 and 28th May 2021. We find the overall and net spillovers between BRIC and G7 to be significant in the short-term, with France, Germany, and the UK transmitting the greatest shocks to BRIC markets. We find no significant evidence of any sporadic volatilities for the studied markets in the COVID-19 period across all frequencies. However, we reveal contagious spillovers between the BRIC and G7 economies across all time scales in 2017 and 2019, which respectively reflect the persistent effect of Brexit and the US-China trade tension. Our findings divulge that in the short-term (mid-to-long-term), France and the UK (Canada and the US), are the sources of contagion between the BRIC and G7 markets. From the net-pairwise spillovers, we report high connectedness between the BRIC index and its members. BRIC countries are found to be transmitters of net-pairwise spillovers to the G7 markets excluding Japan. We recommend portfolio diversification using BRIC and G7 stocks in the intermediate-to-long-term horizon, where spillovers are less concentrated. Additionally, since individual markets are impacted by their unique shocks, investors should pay close attention to these shocks when distributing assets. In the interim, policy-makers and governments across the globe should ensure effective liberalisation of their economies to encourage international trade flows to boost portfolio diversification.

Suggested Citation

  • Samuel Kwaku Agyei & Peterson Owusu Junior & Ahmed Bossman & Emmanuel Asafo-Adjei & Oliver Asiamah & Anokye Mohammed Adam, 2022. "Spillovers and contagion between BRIC and G7 markets: New evidence from time-frequency analysis," PLOS ONE, Public Library of Science, vol. 17(7), pages 1-29, July.
    • Handle: RePEc:plo:pone00:0271088
    DOI: 10.1371/journal.pone.0271088
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    1. Han, SeungOh, 2025. "Dynamic hedging strategies for U.S. investors in international stock ETFs following geopolitical conflicts," Finance Research Letters, Elsevier, vol. 72(C).
    2. Halilibrahim Gökgöz & Salha Ben Salem & Azza Bejaoui & Ahmed Jeribi, 2025. "Connectedness Structure and Volatility Dynamics Between BRICS Markets and International Volatility Indices: An Investigation," International Journal of Finance & Economics, John Wiley & Sons, Ltd., vol. 30(3), pages 2981-3002, July.
    3. Sukhmani Kaur & Shalini Aggarwal & Vikas Arora, 2025. "Co Movement of Stock Market of BRICS with G7 Stock Market," Asia-Pacific Financial Markets, Springer;Japanese Association of Financial Economics and Engineering, vol. 32(2), pages 327-356, June.

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