Time-varying tail risk in BRIC stock markets under global shocks: An ADCC-based approach

Chin Cheong (), Min Lim () and Wong Hee ()
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Chin Cheong: Universiti Tunku Abdul Rahman, Malaysia and Sunway University, Malaysia
Min Lim: Xiamen University Malaysia
Wong Hee: UTAR

Economics Bulletin, 2026, vol. 46, issue 3, 1266 - 1283

Abstract: This study develops a robust market risk framework for BRIC portfolios navigating heightened global uncertainty. By applying the Bai-Perron test, multiple breakpoints emerged within the volatility series, particularly during the COVID-19 pandemic. The inclusion of breakpoint dummy variables into a rolling-window GARCH model was found to be statistically insignificant, impling that rolling estimation sufficiently captures regime shifts autonomously. Using a standard ADCC-GARCH estimation, the results show that BRIC markets exhibit strong volatility persistence, heavy tails, and stable long-run correlations. The portfolio optimization for the subsequent period after 2022 reveals China and India as dominant time-varying allocation drivers during the Russia-Ukraine conflict. Finally, dynamic VaR and ES forecasts, validated by conservative yet statistically reliable backtest results, indicate that the proposed ADCC-GARCH framework accurately quantifies severe tail risk in shock-prone emerging markets.

Keywords: ADCC GARCH; Value-at-Risk; Expected Shortfall. (search for similar items in EconPapers)
JEL-codes: C1 G1 (search for similar items in EconPapers)
Date: 2026-09-30
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