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The dynamics of BRICS's country risk ratings and domestic stock markets, U.S. stock market and oil price

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  • Hammoudeh, Shawkat
  • Sari, Ramazan
  • Uzunkaya, Mehmet
  • Liu, Tengdong

Abstract

BRICS (Brazil, Russia, India, China and South Africa) are viewed currently as pillars of relative political, economic and financial stability, with the prospect of a major shift in future world power. The paper aims at investigating the relationships among the economic, financial and political country risk ratings of the BRICS and relating those risk factors to their respective national stock markets in the presence of representatives of the world's major stock markets and oil market. It also examines the interrelationships among the national country financial risk ratings factors to discern transmission of the risk spectrum among the countries of this group because of the relevance of this information to investors, traders and policy makers. The results demonstrate that only the Chinese stock market is sensitive to all the factors. Financial risk ratings generally demonstrate more sensitivity than economic and political risk ratings, and political risk is sensitive to both financial and economic risk ratings. Among the five BRICS, Brazil shows special sensitivity to economic and financial risks, while Russia and China hold strong sensitivity to political risk and India demonstrates special sensitivity to higher oil prices. Among the global factors, oil price is more sensitive to economic than financial risk, while the S&P 500 reverses this relationship. The two American quantitative easings (QEs) affect BRICS differently.

Suggested Citation

  • Hammoudeh, Shawkat & Sari, Ramazan & Uzunkaya, Mehmet & Liu, Tengdong, 2013. "The dynamics of BRICS's country risk ratings and domestic stock markets, U.S. stock market and oil price," Mathematics and Computers in Simulation (MATCOM), Elsevier, vol. 94(C), pages 277-294.
    • Handle: RePEc:eee:matcom:v:94:y:2013:i:c:p:277-294
    DOI: 10.1016/j.matcom.2012.01.002
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    More about this item

    Keywords

    Financial risk; Economic risk; Political risk; Country risk ratings; ARDL;
    All these keywords.

    JEL classification:

    • D81 - Microeconomics - - Information, Knowledge, and Uncertainty - - - Criteria for Decision-Making under Risk and Uncertainty
    • F23 - International Economics - - International Factor Movements and International Business - - - Multinational Firms; International Business
    • G22 - Financial Economics - - Financial Institutions and Services - - - Insurance; Insurance Companies; Actuarial Studies
    • G31 - Financial Economics - - Corporate Finance and Governance - - - Capital Budgeting; Fixed Investment and Inventory Studies

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