 Geopolitical Risks and Stock Market Dynamics of the BRICSMehmet Balcilar, Matteo Bonato, Riza Demirer and Rangan Gupta No 201648, Working Papers from University of Pretoria, Department of Economics Abstract: This paper examines the effect of geopolitical uncertainty on return and volatility dynamics in the BRICS stock markets via nonparametric causality-in-quantiles tests. The effect of geopolitical risks (GPRs) is found to be heterogeneous across the BRICS stock markets, suggesting that news regarding geopolitical tensions do not affect return dynamics in these markets in a uniform way. GPRs are generally found to impact stock market volatility measures, rather than returns, and often at return quantiles below the mean, indicating the role of GPRs as driver of bad volatility in these markets. While Russia bears the greatest risk exposure to GPRs in terms of both return and volatility, India is found to be the most resilient BRIC nation with no significant causality effects observed. We argue that a combination of factors including exposure to political and financial risks, the strength of domestic demand and exposure to the U.S dollar in foreign exchange reserves drive the heterogeneity in the reaction of these emerging stock markets to geopolitical risks. Keywords: Geopolitical Risks; Stock Returns; Volatility; BRICS (search for similar items in EconPapers) There are no downloads for this item, see the EconPapers FAQ for hints about obtaining it. Related works: Export reference: BibTeX RIS (EndNote, ProCite, RefMan) HTML/Text Persistent link: https://EconPapers.repec.org/RePEc:pre:wpaper:201648 Access Statistics for this paper More papers in Working Papers from University of Pretoria, Department of Economics Contact information at EDIRC. |
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