Inter-Linkages between Stock Exchanges: A Study of BRIC Nations
22 Pages Posted: 12 May 2011 Last revised: 26 Nov 2017
Date Written: May 10, 2011
Internationalization of capital markets gives opportunities to the investors to invest their money in the country of their choice, not just in their own country. The relationships between international stock markets have become increasingly important in recent times. This paper studies the inter-linkages between stock markets of Brazil, Russia, India, and China. Daily closing levels of the benchmark indices in the three countries are taken for a period of 1 April 2005 to 31 March 2010. While line charts, co integration and unit-root test are applied to check the stationary nature of the series; Granger’s causality model, Vector Auto Regression (VAR) model and Variance Decomposition Analysis are performed to find out the linkages between the markets under study. The VAR models also confirm the results of Granger’s Causality model.
Keywords: inter-linkages, stationary, Granger’s Causality, Vector Auto Regression Model, Variance Decomposition Analysis
JEL Classification: N20, G15
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