BRIC and the U.S. Financial Crisis: An Empirical Investigation of Stocks and Bonds Markets
Tufts University - Department of Economics
Joe Akira Yoshino
Universidade de São Paulo - Department of Economics
Mariana O. Machado De Sousa
University of Sao Paulo (USP)
December 30, 2011
We examine empirical evidence of the behavior of stocks and bonds from BRIC nations using daily data from January 2003 to July 2010. We present unconditional and conditional empirical results depending upon a simple measure of U.S. financial stress. In the long term, BRIC bonds markets deviate much more from the U.S. financial stress measure than BRIC bonds and stocks deviate among themselves. Stocks and bonds returns correlations for Brazil and Russia are significantly large and negative. The own correlations are more important in determining the evolution of the conditional correlations relative to unexpected news. Dynamic conditional correlations between stock returns, bond returns and U.S. financial stress increase after the Lehman Brothers event in September 2008, except for bond returns in India.
Number of Pages in PDF File: 54
Keywords: BRIC, stock-bond returns, conditional volatility, dynamic conditional correlation, financial crisis
JEL Classification: G01, G15working papers series
Date posted: January 20, 2012
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