Does Global Fear Predict Fear in BRICS Stock Markets? Evidence from a Bayesian Graphical VAR Model

Elie Bouri (), Rangan Gupta, Seyedmehdi Hosseini () and Chi Keung Lau
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Seyedmehdi Hosseini: Cardiff Business School, Cardiff University, UK and Kent Business School, University of Kent, UK

No 201704, Working Papers from University of Pretoria, Department of Economics

Abstract: We examine the predictive power of implied volatility in the commodity and major developed stock markets for the implied volatility in individual BRICS stock markets. We use daily data from 16 March 2011 to 07 October 2016 and employ the newly developed Bayesian Graphical Vector Autoregressive (BGVAR) model of Ahelegbey et al. (2016). We report evidence that the predictability of individual implied volatilities in BRICS is generally a function of both global and regional stock market implied volatilities, and that the role of commodity market volatility is marginal in general, except for South Africa. Important implications for policy-makers and portfolio managers are discussed.

Keywords: Bayesian graphical VAR; volatility predictability; implied volatility index; VIX; BRICS (search for similar items in EconPapers)
JEL-codes: C32 G15 (search for similar items in EconPapers)
Pages: 28 pages
Date: 2017-01
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (4)

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Persistent link: https://EconPapers.repec.org/RePEc:pre:wpaper:201704

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