The spillover effects of the sub-prime mortgage crisis and optimum asset allocation in the BRICV stock markets

Shu-Mei Chiang, Hsin-Fu Chen and Chi-Tai Lin

Global Finance Journal, 2013, vol. 24, issue 1, 30-43

Abstract: In the aftermath of the sub-prime mortgage crisis, we set out to investigate the spillover effects of returns and volatility in the US stock market on the stock markets of Brazil, Russia, India, China and Vietnam (BRICVs). The results of our application of the ARJI (autoregressive conditional jump intensity) model reveal that the greatest contagious effects of returns and volatility from the US market before the crisis were felt by Russia; however, following the crisis, the most intense spillover effects are found to be on Vietnam. While India, the most efficient of these markets, demonstrates the lowest total long-run risk, an inverse situation is discernible for both China and Brazil. Our results therefore suggest that in the design of their asset allocation strategies, investors with risk aversion should consider investing greater proportions of their funds in India, while being conservative in both Brazil and China to avoid inefficient and risky investment.

Keywords: BRICVs; ARJI model; Spillover effects; Information efficiency; Market risk (search for similar items in EconPapers)
JEL-codes: C4 G1 G15 G34 (search for similar items in EconPapers)
Date: 2013
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (10)

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Persistent link: https://EconPapers.repec.org/RePEc:eee:glofin:v:24:y:2013:i:1:p:30-43

DOI: 10.1016/j.gfj.2013.03.001

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