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Predicting Stock Returns and Volatility in BRICS Countries during a Pandemic: Evidence from the Novel Wild Bootstrap Likelihood Ratio Approach

Author

Listed:
  • Oktay Özkan

    (Department of Business Administration, Faculty of Economics and Administrative Sciences, Tokat Gaziosmanpasa University, Tokat, Turkey)

  • Godwin Olasehinde-Williams

    (Istanbul Ticaret University, Turkey & University of Ilorin, Nigeria)

  • Ifedola Olanipekun

    (Adeyemi College of Education, Ondo, Nigeria)

Abstract

In this study, we examine how attention to different pandemics leads returns and volatility of BRICS stock markets, while controlling for economic policy uncertainty. The attention is measured via the newly developed daily infectious disease equity market volatility tracker (EMV-ID). To achieve the study objective, the wild bootstrap likelihood ratio test is employed in analysing time-series data covering the period November 1997 – May 2021. The estimations confirm a time-varying predictive performance of the EMV-ID on both stock returns and volatility series of BRICS, which increases significantly during the months marked by pandemics. The predictive power of the EMV-ID on stock market volatility is however relatively stronger than its predictive power on stock market returns. Our results are robust to alternative specification of volatility based on a Generalized Autoregressive Conditional Heteroskedasticity model.

Suggested Citation

  • Oktay Özkan & Godwin Olasehinde-Williams & Ifedola Olanipekun, 2022. "Predicting Stock Returns and Volatility in BRICS Countries during a Pandemic: Evidence from the Novel Wild Bootstrap Likelihood Ratio Approach," Czech Journal of Economics and Finance (Finance a uver), Charles University Prague, Faculty of Social Sciences, vol. 72(2), pages 124-149, June.
    • Handle: RePEc:fau:fauart:v:72:y:2022:i:1:p:124-149
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    File URL: https://journal.fsv.cuni.cz/mag/article/show/id/1499
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    More about this item

    Keywords

    pandemics; the wild bootstrap likelihood ratio test; BRICS; stock market returns; stock market volatility;
    All these keywords.

    JEL classification:

    • C32 - Mathematical and Quantitative Methods - - Multiple or Simultaneous Equation Models; Multiple Variables - - - Time-Series Models; Dynamic Quantile Regressions; Dynamic Treatment Effect Models; Diffusion Processes; State Space Models
    • G12 - Financial Economics - - General Financial Markets - - - Asset Pricing; Trading Volume; Bond Interest Rates
    • D53 - Microeconomics - - General Equilibrium and Disequilibrium - - - Financial Markets

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