Quantile-Time-Frequency Connectedness in Global Equity Markets: Evidence from BRICS and G7 Economies

Nejib Hachicha (), Fredj Amine Dammak and Mejed Boumrifeg
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Nejib Hachicha: Faculty of Economics and Management, University of Sfax, Sfax 3018, Tunisia
Fredj Amine Dammak: Oise Institute of Technology (IUT), University of Picardy, 60000 Beauvais, France
Mejed Boumrifeg: Faculty of Economics and Management, University of Sfax, Sfax 3018, Tunisia

JRFM, 2025, vol. 18, issue 9, 1-29

Abstract: We examine the quantile-time-frequency connectedness of stock returns among BRICS and G7 markets over the period January 2000 to January 2024, employing the Quantile Vector Autoregression (QVAR) model. Our findings reveal that spillover effects intensify during periods of extreme market conditions, compared to more tranquil phases. Furthermore, the stock markets of France, Germany, the United States, the United Kingdom, Italy, and Canada emerge as primary sources of contagion, whereas the BRICS markets and Japan primarily act as recipients across all quantile regimes. The frequency-quantile decomposition reveals that short-term dynamics primarily drive the net transmission of shocks at both the median and upper quantiles, whereas long-term dynamics are dominant at the lower quantile, indicating more persistent effects during market downturns. Finally, we construct investment portfolios based on the Minimum Connectedness Portfolio (MCP) approach and evaluate them through average portfolio weights and Hedging Effectiveness (HE) ratios. The results demonstrate that G7-based portfolios tend to have lower average weights and higher hedging efficiency, implying greater diversification benefits and enhanced risk mitigation performance compared to BRICS-based portfolios.

Keywords: BRICS and G7 markets; dynamic quantile connectedness; quantile frequency connectedness; minimum connectedness portfolio (search for similar items in EconPapers)
JEL-codes: C E F2 F3 G (search for similar items in EconPapers)
Date: 2025
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