Spillover effect of US dollar on the stock indices of BRICS

G. Naresh, Gopala Vasudevan, S. Mahalakshmi and S. Thiyagarajan

Research in International Business and Finance, 2018, vol. 44, issue C, 359-368

Abstract: During recent years, researchers have given more attention towards the spillover effects between exchange rates and stock indices, but the literature in this area seems to be inadequate and the interactions between currencies and stock markets are still not clear. This entails more attention to the dynamics of spillover effects between exchange rates and stock indices. Especially, after the global economic crisis BRICS has emerged as an inevitable economic force by strengthening its economic, financial and political relationship. The important reason behind this is that the global investors are considering BRICS as the most favourable destination for portfolios diversification. Besides, the characteristics of stock markets, the investors’ behaviour and the economic policies of BRICS are different from that of developed and other emerging nations. The existing literatures on the interactions between stock and currency markets of BRICS are comparatively limited and there is hardly any research that studied the long-run spillovers between stock and currency markets in BRICS. Hence, this research study has tried to identify the long-run spillover effect of US dollar on major stock indices of BRICS nations by applying individual and Panel Generalized Method of Moments (GMM). The results indicate that the appreciation in the value of BRICS currencies against dollars has increased the value of the respective nation’s stock indices.

Keywords: BRICS; Spillover; GMM; Exchange rate; Stock indices (search for similar items in EconPapers)
Date: 2018
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Citations: View citations in EconPapers (13)

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Persistent link: https://EconPapers.repec.org/RePEc:eee:riibaf:v:44:y:2018:i:c:p:359-368

DOI: 10.1016/j.ribaf.2017.07.105

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