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The Changing Role of Financial Stress, Oil Price, and Gold Price in Financial Contagion among US and BRIC Markets

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  • Baris Kocaarslan
  • Ugur Soytas
  • Ramazan Sari
  • Ecenur Ugurlu

Abstract

The objective of this paper is to explore the determining factors behind financial contagion between US and BRIC (Brazil, Russia, India, and China) equity markets. To this end, we investigate the effects of global macroeconomic factors on the time‐varying correlations among these markets obtained by asymmetric dynamic conditional correlation method. Utilizing quantile regression analysis, we examine the determinants of financial contagion at different levels of time‐varying correlations. The results of quantile regression analyses reveal that global financial crisis (GFC) (2008) leads to changes in the dependence structure between dynamic conditional correlations among equity markets and global macroeconomic factors, such as global financial stress, oil prices, and gold prices. Following the GFC, monetary, and fiscal policy changes in the BRIC markets and hence changing macroeconomic risks of these markets are conducive to these changes. Our findings also demonstrate the importance of cross‐market rebalancing channel for information transmission across US and BRIC markets.

Suggested Citation

  • Baris Kocaarslan & Ugur Soytas & Ramazan Sari & Ecenur Ugurlu, 2019. "The Changing Role of Financial Stress, Oil Price, and Gold Price in Financial Contagion among US and BRIC Markets," International Review of Finance, International Review of Finance Ltd., vol. 19(3), pages 541-574, September.
    • Handle: RePEc:bla:irvfin:v:19:y:2019:i:3:p:541-574
    DOI: 10.1111/irfi.12189
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    1. Ayadi, Ahmed & Gana, Marjène & Goutte, Stéphane & Guesmi, Khaled, 2023. "Optimizing portfolios for the BREXIT: An equity-commodity analysis of US, European and BRICS markets," Journal of International Financial Markets, Institutions and Money, Elsevier, vol. 89(C).
    2. Hoque, Mohammad Enamul & Soo-Wah, Low & Tiwari, Aviral Kumar & Akhter, Tahmina, 2023. "Time and frequency domain connectedness and spillover among categorical and regional financial stress, gold and bitcoin market," Resources Policy, Elsevier, vol. 85(PA).
    3. Naeem, Muhammad Abubakr & Hasan, Mudassar & Arif, Muhammad & Suleman, Muhammad Tahir & Kang, Sang Hoon, 2022. "Oil and gold as a hedge and safe-haven for metals and agricultural commodities with portfolio implications," Energy Economics, Elsevier, vol. 105(C).
    4. Wang, Ningli & You, Wanhai, 2023. "New insights into the role of global factors in BRICS stock markets: A quantile cointegration approach," Economic Systems, Elsevier, vol. 47(2).
    5. Tiwari, Aviral Kumar & Aikins Abakah, Emmanuel Joel & Doğan, Buhari & Adekoya, Oluwasegun B. & Wohar, Mark, 2024. "Asymmetric spillover effects in energy markets," International Review of Economics & Finance, Elsevier, vol. 92(C), pages 470-502.
    6. Hong, Yanran & Wang, Lu & Liang, Chao & Umar, Muhammad, 2022. "Impact of financial instability on international crude oil volatility: New sight from a regime-switching framework," Resources Policy, Elsevier, vol. 77(C).
    7. Hong, Yanran & Li, Pan & Wang, Lu & Zhang, Yaojie, 2023. "New evidence of extreme risk transmission between financial stress and international crude oil markets," Research in International Business and Finance, Elsevier, vol. 64(C).
    8. Dibooglu, Sel & Cevik, Emrah I. & Gillman, Max, 2022. "Gold, silver, and the US dollar as harbingers of financial calm and distress," The Quarterly Review of Economics and Finance, Elsevier, vol. 86(C), pages 200-210.
    9. Chen, Jinyu & Wang, Yilin & Ren, Xiaohang, 2023. "Asymmetric effect of financial stress on China’s precious metals market: Evidence from a quantile-on-quantile regression," Research in International Business and Finance, Elsevier, vol. 64(C).
    10. Zhang, Hongwei & Wang, Peijin, 2021. "Does Bitcoin or gold react to financial stress alike? Evidence from the U.S. and China," International Review of Economics & Finance, Elsevier, vol. 71(C), pages 629-648.
    11. Wang, Gang-Jin & Chen, Yan & Zhu, You & Xie, Chi, 2024. "Systemic risk prediction using machine learning: Does network connectedness help prediction?," International Review of Financial Analysis, Elsevier, vol. 93(C).
    12. Badamvaanchig, Mungunzul & Islam, Moinul & Kakinaka, Makoto, 2021. "Pass-through of commodity price to Mongolian stock price: Symmetric or asymmetric?," Resources Policy, Elsevier, vol. 70(C).
    13. Naeem, Muhammad Abubakr & Hasan, Mudassar & Arif, Muhammad & Balli, Faruk & Shahzad, Syed Jawad Hussain, 2020. "Time and frequency domain quantile coherence of emerging stock markets with gold and oil prices," Physica A: Statistical Mechanics and its Applications, Elsevier, vol. 553(C).
    14. Chancharat, Surachai & Sinlapates, Parichat, 2023. "Dependences and dynamic spillovers across the crude oil and stock markets throughout the COVID-19 pandemic and Russia-Ukraine conflict: Evidence from the ASEAN+6," Finance Research Letters, Elsevier, vol. 57(C).

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