Country Risk Ratings and Stock Market Returns in BRICS Countries: A Nonlinear Dynamic Approach

Adnen Ben Nasr (adnen.bennasr@isg.rnu.tn), Juncal Cunado, Riza Demirer and Rangan Gupta
Additional contact information
Juncal Cunado: University of Navarra, Pamplona, Spain

No 201758, Working Papers from University of Pretoria, Department of Economics

Abstract: This study examines the linkages between BRICS stock market returns, country risk ratings and international factors via Non-linear Auto Regressive Distributed Lags models (NARDL) that allow testing the asymmetric effects of changes in country risk ratings on stock market returns. We show that BRICS countries exhibit quite a degree of heterogeneity in the interaction of their stock market returns with country-specific political, financial and economic risk ratings. Positive and negative rating changes in some BRICS countries are found to have significant implications for both local stock market returns as well as commodity price dynamics. While the commodity market acts as a catalyst for these emerging stock markets in the long-run, we also observe that negative changes in the country risk ratings generally command a higher impact on stock returns, implying the greater impact of bad news on market dynamics. Our findings suggest that not all BRICS nations are the same in terms of how they react to ratings changes and how they interact with global market variables.

Keywords: Asymmetric responses; NARDL models; Stock market returns; Country risk ratings (search for similar items in EconPapers)
JEL-codes: C32 F21 G32 (search for similar items in EconPapers)
Pages: 29 pages
Date: 2017-08
References: Add references at CitEc
Citations: View citations in EconPapers (1)

There are no downloads for this item, see the EconPapers FAQ for hints about obtaining it.

Related works:
This item may be available elsewhere in EconPapers: Search for items with the same title.

Export reference: BibTeX RIS (EndNote, ProCite, RefMan) HTML/Text

Persistent link: https://EconPapers.repec.org/RePEc:pre:wpaper:201758

Access Statistics for this paper

More papers in Working Papers from University of Pretoria, Department of Economics Contact information at EDIRC.
Bibliographic data for series maintained by Rangan Gupta (rangan.gupta@up.ac.za).