Dynamic Linkages between Brics and Other Emerging Equity Markets

Abstract

In this paper, we analyze dynamic interactions between stock markets of BRICS (Brazil, Russia, India, China and South Africa) and other select emerging economies as classified by IMF [1] from January 2001 to June 2017. We employ ADCC-EGARCH model as well as block aggregation technique as suggested by Diebold-Yilmaz [2] framework and order-invariance of GVDs (Generalized Variance Decompositions) as developed by Greenwood-Nimmo, Nguyen, & Rafferty [3] to examine return and risk spillovers within as well as across the BRICS and other sample Emerging Market Economies (EMEs). The results suggest the cohesiveness within BRICS equity markets is moderate. Our results also show increased integration amongst BRICS economies during the global financial crisis period, implying the presence of Contagion effect. Furthermore, Mexico, Chile, Hungary, Turkey and Poland seem to be good candidates to be included along with BRICS for forming a larger Emerging market economic block. This expanded block will not only ensure strengthening trade and financial ties among the participating countries, but also provide a better balance between the emerging and the developed world. This paper contributes immensely to the literature on international finance dealing with financial integration, particularly for emerging markets. The study provides important implications for global policy makers, international economic agencies, investors and the academic community.

Inter-linkages between the stock exchanges of emerging economies: Evidence from BRICS

“…Kumar (2015) the study was conducted to examine the connectedness and co-integration among India and world economy (US, Europe and other emerging markets) and evidenced that the absence of contagious effect on Indian stock market and cointegration exists between Indian and world economy at a low level, but global shocks can sabotage the Indian stock market as well as the entire economy in the long run. Sehgal, Mittal, and Mittal (2019) the study analyzed the vigorous cohesiveness between the BRICS and other emerging country's stock markets, applied Asymmetric Dynamic. Conditional Correlation -Exponential GARCH (ADCC)-EGARCH and Block Aggregation technique, resulted in moderate integration within the BRICS stock markets and with other emerging stock markets too.…”