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Does Global Fear Predict Fear in BRICS Stock Markets? Evidence from a Bayesian Graphical VAR Model

Author

Listed:
  • Elie Bouri

    (USEK Business School, Holy Spirit University of Kaslik (USEK), Lebanon)

  • Rangan Gupta

    (Department of Economics, University of Pretoria, South Africa)

  • Seyedmehdi Hosseini

    (Cardiff Business School, Cardiff University, UK and Kent Business School, University of Kent, UK)

  • Chi Keung Marco Lau

    (Newcastle Business School, Northumbria University, Newcastle upon Tyne, UK)

Abstract

We examine the predictive power of implied volatility in the commodity and major developed stock markets for the implied volatility in individual BRICS stock markets. We use daily data from 16 March 2011 to 07 October 2016 and employ the newly developed Bayesian Graphical Vector Autoregressive (BGVAR) model of Ahelegbey et al. (2016). We report evidence that the predictability of individual implied volatilities in BRICS is generally a function of both global and regional stock market implied volatilities, and that the role of commodity market volatility is marginal in general, except for South Africa. Important implications for policy-makers and portfolio managers are discussed.

Suggested Citation

  • Elie Bouri & Rangan Gupta & Seyedmehdi Hosseini & Chi Keung Marco Lau, 2017. "Does Global Fear Predict Fear in BRICS Stock Markets? Evidence from a Bayesian Graphical VAR Model," Working Papers 201704, University of Pretoria, Department of Economics.
    • Handle: RePEc:pre:wpaper:201704
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    References listed on IDEAS

    as
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    Cited by:

    1. Ifedolapo Olabisi Olanipekun & Hasan Güngör & Godwin Olasehinde-Williams, 2019. "Unraveling the Causal Relationship Between Economic Policy Uncertainty and Exchange Market Pressure in BRIC Countries: Evidence From Bootstrap Panel Granger Causality," SAGE Open, , vol. 9(2), pages 21582440198, June.
    2. Lau, Chi Keung Marco & Sheng, Xin, 2018. "Inter- and intra-regional analysis on spillover effects across international stock markets," Research in International Business and Finance, Elsevier, vol. 46(C), pages 420-429.
    3. Muhammad Ali Nasir & Muhammad Shahbaz & Trinh Thi Mai & Moade Shubita, 2021. "Development of Vietnamese stock market: Influence of domestic macroeconomic environment and regional markets," International Journal of Finance & Economics, John Wiley & Sons, Ltd., vol. 26(1), pages 1435-1458, January.
    4. Babak Fazelabdolabadi, 2019. "Uncertainty and energy-sector equity returns in Iran: a Bayesian and quasi-Monte Carlo time-varying analysis," Financial Innovation, Springer;Southwestern University of Finance and Economics, vol. 5(1), pages 1-20, December.

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    More about this item

    Keywords

    Bayesian graphical VAR; volatility predictability; implied volatility index; VIX; BRICS;
    All these keywords.

    JEL classification:

    • C32 - Mathematical and Quantitative Methods - - Multiple or Simultaneous Equation Models; Multiple Variables - - - Time-Series Models; Dynamic Quantile Regressions; Dynamic Treatment Effect Models; Diffusion Processes; State Space Models
    • G15 - Financial Economics - - General Financial Markets - - - International Financial Markets

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