Co Movement of Stock Market of BRICS with G7 Stock Market

Sukhmani Kaur (), Shalini Aggarwal () and Vikas Arora ()
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Sukhmani Kaur: Chandigarh University
Shalini Aggarwal: Chandigarh University
Vikas Arora: Sunshine Group of Institutions

Asia-Pacific Financial Markets, 2025, vol. 32, issue 2, No 1, 327-356

Abstract: Abstract This document investigates the potential for international portfolio diversification between G7 stock markets and the BRICS counties, that is, Brazil, Russia, India, China, and South Africa. The authors propose a theoretical model that suggests risk-averse investors would seek diversification internationally. The study examines the long-term causality and short run causality between the stock market indices of G7 countries and the stock markets of each BRICS nation. Through unit root tests, the authors check the stationarity of the series. The study also employs the Johansen cointegration tests to examine the cointegration between the variables. Additionally, VECM is employed to assess the long-run causality and Wald test is used to understand short-run causality of the stock market indices. The results indicate a mixed response, revealing both short and long-run associations between the stock market indices of Brazil and Russia with the G7 stock market. The document provides valuable insights into the co-movement of G7 and BRICS stock markets, highlighting the potential for diversification benefits and identifying specific countries with stronger correlations. Policy-makers and capital market regulators can use the findings to develop robust policy frameworks and regulatory mechanisms to prevent potential stock market crashes and systemic failures.

Keywords: BRICS stock market; G7 stock market; VECM; Stock market indices; Wald test (search for similar items in EconPapers)
Date: 2025
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DOI: 10.1007/s10690-024-09455-w

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