Vol 4, No 2 (2016)
Integration and Contagion of BRIC Financial Markets
Paulo Matos, Regis Oquendo, Nicolino Trompieri
Abstract
We add to the debate promoted by Misra and Mahakud (2009) and Chittedi (2010) aiming to measure the levels of financial integration and contagion of BRIC. We follow Vahid and Engle (1993) and Johansen et al (2000) in order to extract individual and common trends and cycles of BRIC major stock market indices. Our evidence in the short-run suggests a contagion effect with Brazilian and Chinese financial markets playing a leading role, which can be useful to worldwide investors that should consider reactions in these markets during crisis as a predictor of other BRIC reactions through the contagion channel. In the long-run we are able to identify three common scenarios: one of them reflecting a possible converging trajectory for BRIC financial markets, and the other ones following negative risk drivers still incorporating the effects of the recent crisis, without recovery of these markets. This finding suggests that BRIC financial markets are linked, even in an environment without the desirable level of harmonization of respective stock markets with the international rules and regulations.
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Keywords
BRIC Stock Market Indices; Common Trends; Common Cycles.
Publication information
Volume 4, Issue 2
Year of Publication: 2016
ISSN: 1857 - 8721
Publisher: EDNOTERA
How to cite
Matos, P., Oquendo, R., Trompieri, N.: Integration and Contagion of BRIC Financial Markets. Journal of Applied Economics and Business, Vol 4, No. 2, 23-48. (2016)