TITLE:
Dynamic Linkages between Brics and Other Emerging Equity Markets
AUTHORS:
Sanjay Sehgal, Arjun Mittal, Anand Mittal
KEYWORDS:
BRICS, EMEs, Return-Spillovers, Volatility-Spillovers, ADCC, Diebold-Yilmaz
JOURNAL NAME:
Theoretical Economics Letters,
Vol.9 No.7,
August
31,
2019
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.