A study on economic policy uncertainty, geopolitical risk and stock market spillovers in BRICS countries

Rong Li, Guangyuan Tang, Chen Hong, Sufang Li, Bingting Li and Shujian Xiang

The North American Journal of Economics and Finance, 2024, vol. 73, issue C

Abstract: The convergence of geopolitical tensions and economic disruptions may lead to significant fluctuations in the stock markets of BRICS countries. Against this background, in order to accurately meet new recovery opportunities of the stock market, the research on the spillover effect of the stock market is of great practical significance. This paper examines monthly stock market closing data from March 2001 to March 2023. It first uses the DY spillover index to analyze the spillover effects between economic policy uncertainty, geopolitical risks and the stock markets in BRICS countries. Then, based on the data obtained through the DY spillover index, this study draws a network chart using complex network and compares the difference of spillover effects before and after the pandemic. It finds that: The total spillover index is greater than 0, there is a bidirectional spillover effect between the variables, and there is an asymmetric feature. This feature is also confirmed by the fact that the overflow values between the indices on the network chart are inconsistent; the Russian stock index, the Brazilian stock index, the Indian stock index and the South African stock index are all risk bearers. But the Shanghai Composite Index, economic policy uncertainty and geopolitical risk are all risk recipients. To this end, the conclusions of this study can provide some theoretical basis for the policy makers of the BRICS countries to promote the smooth operation of their stock markets.

Keywords: Economic policy uncertainty; Geopolitical risks; DY spillover index; Complex network; BRICS countries (search for similar items in EconPapers)
Date: 2024
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Persistent link: https://EconPapers.repec.org/RePEc:eee:ecofin:v:73:y:2024:i:c:s1062940824001141

DOI: 10.1016/j.najef.2024.102189

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