Dynamics of volatility behaviour and transmission: evidences from BRICS countries

Isha Narula ()
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Isha Narula: Guru Gobind Singh Indraprastha University

DECISION: Official Journal of the Indian Institute of Management Calcutta, 2016, vol. 43, issue 1, No 3, 51 pages

Abstract: Abstract The present study investigates various aspects of volatility behaviour of BRIC/BRICS nations in varying time regimes. The study has been divided into three regimes where the first regime represents the pre-formation period, the second regime signifies post-formation period, and the third regime symbolizes post-formation period after the entry of South Africa. CUSUMSQ test has been applied in the study to recognize the structural breaks in the conditional variance on the formation of BRIC and BRICS. The study has employed various GARCH family models, such as GARCH (p,q) model, EGARCH model, GJR GARCH model, PGARCH model and CGARCH model. GARCH (p,q) model has been employed to explore the level of volatility spillover among the nations in different regimes. With the assistance of CGARCH model, the study exhibited the behaviour of conditional variance of BRIC/BRICS nations and discovered the existence of the permanent and transitory components. EGARCH, GJR GARCH model and PGARCH model explored the existence of “low volatility anomaly” for all the nations in all the regimes. The outcomes of the study exhibit little scope of diversification in all the three regimes. The study confirms the impact of global recession on the performance and development of BRICS nations. Hence, the investors can strategize their investment decisions as per the volatility behaviours of respective stock markets and current market situations.

Keywords: GARCH; EGARCH; GJR GARCH; PGARCH; CGARCH; Spillover effect; Leverage effect; G02; G14 (search for similar items in EconPapers)
Date: 2016
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Citations: View citations in EconPapers (1)

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DOI: 10.1007/s40622-015-0119-8

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