Directional Spillover Effects Between BRICS Stock Markets and Economic Policy Uncertainty

Hung, Ngo Thai

doi:10.1007/s10690-020-09328-y

Cited by 28 publications

(22 citation statements)

References 45 publications

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“…This method is based on forecast-error variance decompositions from a general vector autoregressive (VAR) specification, where the forecast-error variance decompositions are invariant to variable ordering. The primary benefit of this method is that the spillover index measures the dynamic magnitude of return spillovers over time, capturing spillover direction (Hung, 2021c; Kang et al. , 2019b).…”

Section: Introductionmentioning

confidence: 99%

Asymmetric connectedness among S&P 500, crude oil, gold and Bitcoin

Hung

2022

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PurposeThis paper investigates the dynamic intercorrelation among cryptocurrency (Bitcoin) and conventional financial assets (gold, oil and S&P 500).Design/methodology/approachThe dynamic contemporaneous nexus has been analyzed using spillover index developed and extended by Diebold and Yilmaz (2012, 2014) and Kyrtsou-Labys (2006) nonlinear causality tests. This study is implemented using the daily data spanning from January 2013 to December 2021.FindingsFirst, using the spillover index, the authors find evidence that the S&P 500 was a net transmitter of volatility from oil and gold markets, but a net receiver of volatility from Bitcoin. Return spillovers from crude oil were transmitted first to gold, and Bitcoin markets and return spillovers from gold were transmitted to Bitcoin. Second, Kyrtsou-Labys nonlinear causality tests provide us further insights into the lead-lag interconnections among the four key considered variables from the economic perspective. Specifically, a close inspection of these empirical results, the integration of the four key assets is significant. Similarly, price fluctuation dependency among Bitcoin, stock, gold and oil markets is generally minimal, but it strengthens throughout the COVID-19 period.Originality/valueThis paper is the first study employing the spillover index Diebold-Yilmaz alongside with Kyrtsou-Labys nonlinear causality tests not only to capture the directional return spillover effects but also to highlight the potential presence of asymmetric causality relationships, nonlinear effects among assets under investigation that the previous studies have been ignored in these relations. Therefore, the main contribution of this article to the related literature in this field is significant.

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Section: Introductionmentioning

confidence: 99%

Asymmetric connectedness among S&P 500, crude oil, gold and Bitcoin

Hung

2022

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“…Particularly for the GEPU, which has stimulated attention from researchers, investors, and policy makers since the 2007-2009 Global Financial Crisis [46,51,68], we found significant negative information flows from the GEPU to stock markets of BRICS mostly in the long-term. It is obvious that stock markets of BRICS economies are susceptible to external shocks in the long-term perspective.…”

Section: Resultsmentioning

confidence: 83%

“…Accordingly, four macroeconomic variables which have greater influence on economic activities and may be of much concern to domestic and global investors of stocks are utilised. As indicated by prior studies, these are exchange rate [36], gross domestic product [70], global economic policy uncertainty [51], and inflation rate [71].…”

Section: Introductionmentioning

confidence: 96%

“…Notwithstanding, recent studies on the macroeconomicstock price/returns nexus are gaining much interest in timefrequency models to assess their time and frequency dynamics such as wavelet analysis [32,33,[46][47][48][49][50][51][52]. But when using wavelet analysis, a predefined mother wavelet is needed to decompose a signal, and the selection of the mother wavelet is biased [53,54].…”

Section: Introductionmentioning

confidence: 99%

“…In addition to the country specific macroeconomic variables, we consider global economic policy uncertainty, which has stimulated attention from researchers, investors, and policy makers since the 2007-2009 Global Financial Crisis [46,51,68]. us, economic policy uncertainty, which includes uncertainty related to monetary policy, fiscal policy, or rules and regulations, can adversely distress the financial system.…”

Section: Introductionmentioning

confidence: 99%

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A CEEMDAN‐Based Entropy Approach Measuring Multiscale Information Flow between Macroeconomic Conditions and Stock Returns of BRICS

et al. 2022

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We model a mixture of asymmetric and nonlinear bidirectional and unidirectional causality between four macroeconomic variables (exchange rate, GDP, global economic policy uncertainty, and relative CPI) and stock returns of BRICS economies in the frequency-domain using the information flow theory. The Complete Ensemble Empirical Mode Decomposition with Adaptive Noise (CEEMDAN)-based Rényi effective transfer entropy approach is used to establish dynamic flow of information between macroeconomic variables and stock returns of BRICS. The original return series suggested insignificant information flow between most macroeconomic variables and stock returns. However, we reveal both asymmetric and tail dependent analyses at diverse scales between macroeconomic variables and stock returns of BRICS economies. Moreover, we find negative significant flow of information between the variables, in that knowing the history of one variable (either stock or macroeconomic variable), in this case, indicates considerably more uncertainty than knowing the history of only the other variable (either stock or macroeconomic variable). We also observe that global economic policy uncertainty has the most significant adverse causal relationship with stock returns of BRICS, especially in the long term. These results have important implications that investors and policymakers should take into account. Regulators should consider instituting sound policy actions geared towards minimising long-term effects of external shocks and uncertainties.

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Exchange Rate and Stock Prices Volatility Connectedness and Spillover during Pandemic Induced-Crises: Evidence from BRICS Countries

Hussain

Bashir

Rehman

2023

Asia-Pac Financ Markets

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This paper investigated exchange rate and stock price volatility connectedness and spillover in Brazil, Russia, India, China, and South Africa (BRICS) during pandemic-induced crises. We first extracted volatility using the Generalized Auto-Regressive Conditional Heteroskedasticity (GARCH) model. Then volatility connectedness and spillover were investigated by using (Diebold and Yilmaz, International Journal of Forecasting, 28 (1), 57–66, 2012) method. We find that exchange rate volatility and stock return volatilities are connected during pandemic-induced crises. The study also finds volatilities spillover among countries in the sample. Russia has strong volatility connectedness with India in these financial markets. The direction of volatility spillover is from Russia to India. Similarly, Brazil has strong volatility connectedness with South Africa and the direction volatility spillover is from Brazil to South Africa. Finally, China has a weak volatility connection with the remaining BRICS countries. Thus, the volatility transfer in these financial markets and across BRICS countries has economic implications.

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Directional Spillover Effects Between BRICS Stock Markets and Economic Policy Uncertainty

Cited by 28 publications

References 45 publications

Asymmetric connectedness among S&P 500, crude oil, gold and Bitcoin

Asymmetric connectedness among S&P 500, crude oil, gold and Bitcoin

A CEEMDAN‐Based Entropy Approach Measuring Multiscale Information Flow between Macroeconomic Conditions and Stock Returns of BRICS

Exchange Rate and Stock Prices Volatility Connectedness and Spillover during Pandemic Induced-Crises: Evidence from BRICS Countries

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