Journal article
Risk spillovers and portfolio management between developed and BRICS stock markets
The North American journal of economics and finance, v 41
Jul 2017
Featured in Collection : UN Sustainable Development Goals @ Drexel
Abstract
This paper investigates spillover effects and portfolio diversification between the four major developed stock markets (USA, Europe, Japan and Asia) and five of the most important emerging stock markets known as the BRICS (Brazil, Russia, India, China and South Africa). To this end, we apply the multivariate DECO-FIEGARCH model to daily spot indices during the period 1998–2016. The results reveal a significant and asymmetric long memory process for both the developed and the BRICS markets. Moreover, we find a significant variability in the time-varying conditional correlations between the considered markets during both bull and bear markets, particularly from early 2007 to summer 2008. Additionally, we analyze the optimal portfolio weights, time-varying hedge ratios and hedging effectiveness based on the estimates of the model. The results underline the importance of overweighting the optimal portfolios with stocks from the developed countries over those from the BRICS. Finally, we assess the practical implications for mixed developed-BRICS stock portfolios, based on finding strong evidence of diversification benefits and downside risk reductions that confirm the usefulness of using developed market stocks in the BRICS stock portfolio risk management.
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Details
- Title
- Risk spillovers and portfolio management between developed 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 UniversitySang Hoon Kang - Department of Business Administration Pusan National University Busan 609‐735 Republic of Korea
- Publication Details
- The North American journal of economics and finance, v 41
- Publisher
- Elsevier
- Resource Type
- Journal article
- Language
- English
- Academic Unit
- Economics (School of Economics)
- Web of Science ID
- WOS:000405885200010
- Scopus ID
- 2-s2.0-85026198078
- Other Identifier
- 991019167742804721
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- Collaboration types
- Domestic collaboration
- International collaboration
- Web of Science research areas
- Business, Finance
- Economics