Hype vs Reality on US and BRICS stock markets going their separate ways: post-crisis evidence


Creative Commons License
This work is licensed under a Creative Commons Attribution-NonCommercial 4.0 International License

This paper examines the long-term relationship between BRICS and US stock markets by employing the cointegration technique and Granger causality to investigate the cointegration and causality direction in the capital markets. The impulse response function it is also employed to evaluate the persistence of the shocks. In the analysis, daily spot stock index returns are used from 2010 till 2017. The main findings of the cointegration analysis indicate that the US and BRICS stock markets are cointegrated and at least one cointegration vector exists among them. The Granger causality test shows that unidirectional causality runs from the US market towards the Russian, South African and Indian stock markets, while there is a bidirectional causal relation between US and Brazil stock markets.

view full abstract hide full abstract
    • Figure 1. Stationary series data at first differences
    • Figure 2. Impulse response function outcomes
    • Table 1. Basic statistical properties of US and BRICS stock market indices, 2010–2017
    • Table 2. Correlation matrix
    • Table 3. Unit root tests
    • Table 4. Johansen cointegration test results
    • Table 5. Pairwise Granger causality test