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Financial connectedness in BRICS: Quantile effects and BRICS SUMMIT impacts

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  • Su, Xianfang
  • Chen, Meixia

Abstract

This study examines the financial connectedness among BRICS using a two-step framework. In the first step, financial indices for each BRICS country are estimated by dynamic factor models in which three market characteristics and six sub-financial markets are considered. The estimated financial indices provide more comprehensive pictures of the financial markets in BRICS countries. Then we use the quantile variance decomposition model to discover the financial connectedness in BRICS. The study finds significant heterogeneity in financial connectedness among BRICS countries across quantile levels, with the tail spillover effects being stronger than the mean spillover effects. Russia is a risk transmitter while India is a recipient of risk during the crisis. We also find that the BRICS SUMMIT significantly strengthens the financial connectedness in the BRICS. The study provides international investors with new portfolio strategies and a risk-hedging perspective.

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  • Su, Xianfang & Chen, Meixia, 2024. "Financial connectedness in BRICS: Quantile effects and BRICS SUMMIT impacts," The North American Journal of Economics and Finance, Elsevier, vol. 72(C).
    • Handle: RePEc:eee:ecofin:v:72:y:2024:i:c:s1062940824000792
    DOI: 10.1016/j.najef.2024.102154
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