IDEAS home Printed from https://ideas.repec.org/
MyIDEAS: Log in (now much improved!) to save this paper

Do US policy uncertainty, leveraging costs and global risk aversion impact emerging market equities? An application of bounds testing approach to the BRICS

Listed author(s):
  • Momin, Ebaad
  • Masih, Mansur

‘When the United States sneezes, the world catches a cold. And when America recovers, the planet has a spring in its step’ – For decades together, this metaphor has seemed an accurate description of the global economy. Through this paper we have tried to examine the short and long term dependence structure between the stock markets of emerging markets and influential global factors (US economic policy uncertainty, the global risk aversion and the cheap borrowing costs in the US) using the BRICS countries (Brazil, Russia, India, China and South Africa) as a case study. The study applies the ‘Auto-Regressive Distributed Lag’ (ARDL) technique (Pesaran, Shin, &Smith, Journal of Applied Econometrics, 2001) which has taken care of a major limitation of the conventional cointegrating tests, in that they suffer from the pre test biases. Based on the above rigorous methodology, our evidence tends to suggest that although there have been studies which indicate the impact of the disturbances stemming from the developed world, in the long- run there is a limited impact of these on the BRICS equity markets. These findings are plausible and have strong policy implications for portfolio investing and diversifications by investing in the emerging markets as the BRICS equities could function as a hedge against negative shocks from the developed economies.

If you experience problems downloading a file, check if you have the proper application to view it first. In case of further problems read the IDEAS help page. Note that these files are not on the IDEAS site. Please be patient as the files may be large.

File URL: https://mpra.ub.uni-muenchen.de/65834/1/MPRA_paper_65834.pdf
File Function: original version
Download Restriction: no

Paper provided by University Library of Munich, Germany in its series MPRA Paper with number 65834.

as
in new window

Length:
Date of creation: 18 Jun 2015
Handle: RePEc:pra:mprapa:65834
Contact details of provider: Postal:
Ludwigstraße 33, D-80539 Munich, Germany

Phone: +49-(0)89-2180-2459
Fax: +49-(0)89-2180-992459
Web page: https://mpra.ub.uni-muenchen.de

More information through EDIRC

References listed on IDEAS
Please report citation or reference errors to , or , if you are the registered author of the cited work, log in to your RePEc Author Service profile, click on "citations" and make appropriate adjustments.:

as
in new window


  1. Aloui, Riadh & Aïssa, Mohamed Safouane Ben & Nguyen, Duc Khuong, 2011. "Global financial crisis, extreme interdependences, and contagion effects: The role of economic structure?," Journal of Banking & Finance, Elsevier, vol. 35(1), pages 130-141, January.
  2. Hausman, Joshua & Wongswan, Jon, 2011. "Global asset prices and FOMC announcements," Journal of International Money and Finance, Elsevier, vol. 30(3), pages 547-571, April.
  3. Stelios D. Bekiros, 2013. "Decoupling and the Spillover Effects of the US Financial Crisis: Evidence from the BRIC Markets," Working Paper Series 21_13, The Rimini Centre for Economic Analysis.
  4. Bansal, Ravi & Khatchatrian, Varoujan & Yaron, Amir, 2005. "Interpretable asset markets?," European Economic Review, Elsevier, vol. 49(3), pages 531-560, April.
  5. Ahmad Abd Halim & Mohd Daud Siti Nurazira & Marzuki Ainulashikin, 2008. "Sovereign Credit Ratings and Macroeconomic Variables: An Empirical Analysis on Dynamic Linkages in Malaysia Using Bound Test Approach," The IUP Journal of Applied Economics, IUP Publications, vol. 0(6), pages 29-39, November.
  6. M. Hashem Pesaran & Yongcheol Shin & Richard J. Smith, 2001. "Bounds testing approaches to the analysis of level relationships," Journal of Applied Econometrics, John Wiley & Sons, Ltd., vol. 16(3), pages 289-326.
  7. Goodness C. Aye & Mehmet Balcilar & Rangan Gupta & Nicholas Kilimani & Amandine Nakumuryango & Siobhan Redford, 2014. "Predicting BRICS stock returns using ARFIMA models," Applied Financial Economics, Taylor & Francis Journals, vol. 24(17), pages 1159-1166, September.
  8. Berger, Dave & Turtle, H.J., 2011. "Emerging market crises and US equity market returns," Global Finance Journal, Elsevier, vol. 22(1), pages 32-41.
Full references (including those not matched with items on IDEAS)

This item is not listed on Wikipedia, on a reading list or among the top items on IDEAS.

When requesting a correction, please mention this item's handle: RePEc:pra:mprapa:65834. See general information about how to correct material in RePEc.

For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: (Joachim Winter)

If you have authored this item and are not yet registered with RePEc, we encourage you to do it here. This allows to link your profile to this item. It also allows you to accept potential citations to this item that we are uncertain about.

If references are entirely missing, you can add them using this form.

If the full references list an item that is present in RePEc, but the system did not link to it, you can help with this form.

If you know of missing items citing this one, you can help us creating those links by adding the relevant references in the same way as above, for each refering item. If you are a registered author of this item, you may also want to check the "citations" tab in your profile, as there may be some citations waiting for confirmation.

Please note that corrections may take a couple of weeks to filter through the various RePEc services.

This information is provided to you by IDEAS at the Research Division of the Federal Reserve Bank of St. Louis using RePEc data.