Behaviour of emerging stock markets in the global financial meltdown: Evidence from bric-a.


Bora Aktan*, Pinar Evrim Mandaci , Baris Serkan Kopurlu and Bülent Ersener

This paper examines the emerging market indices of Brazil, Russia, India, China, and Argentina (BRICA) and investigates the linkages among the stock markets of the BRICA countries and their relations with the US market. We employ the vector auto regression (VAR) techniques to model the interdependencies and Granger causality test to find evidence of a short-run relationship between these markets. In addition, we employ the Impulse Response test to evaluate the persistence of shocks by using daily data from 1st January, 2002 to 18th February, 2009. Our findings show that the US market has a significant effect on all BRICA countries in the same trading day. The most integrated markets to the BRICA countries are Russia and Brazil; the least integrated ones are China and Argentina. The Granger causality test supports our VAR calculations and shows that Russia influences all other countries and Brazil affects Argentina, Russia and India. However, China only affects Argentina and Russia. Impulse response test shows that all countries respond to an anticipated shock immediately and recover in nearly five or six days.

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