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Information transmission and dynamics of stock price movements: An empirical analysis of BRICS and US stock markets

Author

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  • Bhuyan, Rafiqul
  • Robbani, Mohammad G.
  • Talukdar, Bakhtear
  • Jain, Ajeet

Abstract

This paper investigates the information transmission and spillover effects between the US stock market and the emerging stock markets of Brazil, Russia, India, China, and South Africa (BRICS) for the period 1999 to 2012. The paper uses a variant of the aggregate shock model under the GARCH framework and investigates the effects of both return and volatility spillover from the US market to the BRICS markets and among the BRICS markets. The chronological order of trading among the six markets (US and five BRICS markets) is utilized in analyzing the transmission of information between the US and BRICS equity markets. The results suggest that the US stock market has a significant mean return and volatility spillover effects on the BRICS stock markets. In addition, the Chinese stock market exerts a significant mean spillover effects on both the Indian and the US stock markets, and the mean spillover effects from the Indian market to the Chinese market are equally strong. Further, overnight returns in the BRICS stock markets are significantly influenced by their own latest daytime returns. The results contribute to the extant spillover literature in demonstrating that the mean and volatility spillover effects exist not only from the US market to the well-developed equity markets of Europe and East Asia as shown in previous studies, but they also exist from the US market to the emerging equity markets of BRICS economies.

Suggested Citation

  • Bhuyan, Rafiqul & Robbani, Mohammad G. & Talukdar, Bakhtear & Jain, Ajeet, 2016. "Information transmission and dynamics of stock price movements: An empirical analysis of BRICS and US stock markets," International Review of Economics & Finance, Elsevier, vol. 46(C), pages 180-195.
    • Handle: RePEc:eee:reveco:v:46:y:2016:i:c:p:180-195
    DOI: 10.1016/j.iref.2016.09.004
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    More about this item

    Keywords

    Volatility; Spillover; BRICS; Emerging markets; GARCH;
    All these keywords.

    JEL classification:

    • C10 - Mathematical and Quantitative Methods - - Econometric and Statistical Methods and Methodology: General - - - General
    • C58 - Mathematical and Quantitative Methods - - Econometric Modeling - - - Financial Econometrics
    • G11 - Financial Economics - - General Financial Markets - - - Portfolio Choice; Investment Decisions
    • G14 - Financial Economics - - General Financial Markets - - - Information and Market Efficiency; Event Studies; Insider Trading
    • G15 - Financial Economics - - General Financial Markets - - - International Financial Markets

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