Journal article
Global financial crisis and spillover effects among the U.S. and BRICS stock markets
International review of economics & finance, v 42, pp 257-276
Mar 2016
Featured in Collection : UN Sustainable Development Goals @ Drexel
Abstract
This article examines the spillover effect between the U.S. market and five of the most important emerging stock markets namely those of the BRICS (Brazil, Russia, India, China and South Africa), and draws implications for portfolio risk modeling and forecasting. It gives consideration to periods before and after the recent global financial crisis (GFC). To this end, the bivariate DCC-FIAPARCH model, the modified ICSS algorithm and the Value-at-Risk (VaR) are employed to capture volatility spillovers, detect potential structural breaks and assess the portfolio market risks. Using the U.S. and the BRICS daily spot market indices for the period from September 1997 to October 2013, our empirical results show strong evidence of asymmetry and long memory in the conditional volatility and significant dynamic correlations between the U.S. and the BRICS stock markets. Moreover, we find several sudden changes in these markets with a common break date centered on September 15, 2008 which corresponds to the Lehman Brothers collapse. The Brazil, India, China and South Africa markets are strongly affected by the GFC, supporting the hypothesis of recoupling (with increased linkages). In contrast, the hypothesis of decoupling is supported for the Russian stock markets only. Finally, the skewed Student-t FIAPARCH models outperform and provide more accurate in-sample estimates and out-of-sample forecasts of VaR than the normal and Student-t FIAPARCH models in almost all cases. These results provide helpful information to financial risk managers, regulators and portfolio investors to determine the diversification benefits among these markets.
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Details
- Title
- Global financial crisis and spillover effects among the U.S. and BRICS stock markets
- Creators
- Walid Mensi - Department of Finance and Accounting, University of Tunis El Manar, B.P. 248, C.P. 2092 Tunis Cedex, TunisiaShawkat Hammoudeh - Drexel UniversityDuc Khuong Nguyen - IPAG Business SchoolSang Hoon Kang - Department of Business Administration Pusan National University Busan 609‐735 Republic of Korea
- Publication Details
- International review of economics & finance, v 42, pp 257-276
- Publisher
- Elsevier
- Resource Type
- Journal article
- Language
- English
- Academic Unit
- Economics (School of Economics)
- Web of Science ID
- WOS:000372377100017
- Scopus ID
- 2-s2.0-84958892473
- Other Identifier
- 991019168080504721
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- Collaboration types
- Domestic collaboration
- International collaboration
- Web of Science research areas
- Business, Finance
- Economics