Journal article
Dynamic Global Linkages of the BRICS Stock Markets with the United States and Europe Under External Crisis Shocks: Implications for Portfolio Risk Forecasting
World economy, v 39(11), pp 1703-1727
01 Nov 2016
Featured in Collection : UN Sustainable Development Goals @ Drexel
Abstract
Crisis shocks often lead to changes in the interdependence across stock markets and thus affect risk assessment and management. This paper investigates the extent to which the global financial crisis of 2008-09, which was triggered by the US subprime crisis in 2007, and the European debt crisis that started at the end of 2009, affects the interdependence of the leading emerging markets of the BRICS countries with those of the United States and Europe. Our empirical analysis makes use of the FIAPARCH model combined with the Dynamic Equicorrelation (DECO-FIAPARCH), which allows for the estimation of market linkage for a large group of countries as a whole, while controlling for asymmetric volatility and long memory. The results reveal the presence of important changes in the time-varying linkages of the BRICS stock markets with the US and European ones. In particular, the average linkages have significantly been higher between 2007 and the first half of 2012 than the remaining part of the sample, and there is also evidence of a structural change around the Lehman Brothers collapse. We also show the effects of these stylised facts on portfolio risk assessment and forecasting.
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Details
- Title
- Dynamic Global Linkages of the BRICS Stock Markets with the United States and Europe Under External Crisis Shocks: Implications for Portfolio Risk Forecasting
- Creators
- Shawkat Hammoudeh - Drexel UniversitySang Hoon Kang - Pusan National UniversityWalid Mensi - Department of Finance and Investment; College of Economics and Administrative Sciences; Al Imam Mohammad Ibn Saud Islamic University (IMSIU); Riyadh Saudi ArabiaDuc Khuong Nguyen - IPAG Business School
- Publication Details
- World economy, v 39(11), pp 1703-1727
- Publisher
- Wiley
- Number of pages
- 25
- Resource Type
- Journal article
- Language
- English
- Academic Unit
- Economics (School of Economics)
- Web of Science ID
- WOS:000387552900002
- Scopus ID
- 2-s2.0-84987608732
- Other Identifier
- 991019167604504721
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- Collaboration types
- Domestic collaboration
- International collaboration
- Web of Science research areas
- Business, Finance
- Economics
- International Relations