The Dynamics of BRICS's Country Risk Ratings and Stock Markets, U.S. Stock Market and Oil Price

40 Pages Posted: 25 Jul 2011

See all articles by Shawkat M. Hammoudeh

Shawkat M. Hammoudeh

Montpellier Business School; Drexel University - Lebow College of Business

Ramazan Sari

Middle East Technical University (METU)

Tengdong Liu

Drexel University - Bennett S. LeBow College of Business

Mehmet Uzunkaya

TR Prime Ministry State Planning Organization

Date Written: July 24, 2011

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 show 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.

Keywords: risk, economic risk, political risk, risk ratings, stock market, ARDL

JEL Classification: D81, F23, G22, G31

Suggested Citation

Hammoudeh, Shawkat M. and Sari, Ramazan and Liu, Tengdong and Uzunkaya, Mehmet, The Dynamics of BRICS's Country Risk Ratings and Stock Markets, U.S. Stock Market and Oil Price (July 24, 2011). Available at SSRN: https://ssrn.com/abstract=1894210 or http://dx.doi.org/10.2139/ssrn.1894210

Shawkat M. Hammoudeh (Contact Author)

Montpellier Business School ( email )

2300 Avenue des Moulins
Montpellier, 34080
France

Drexel University - Lebow College of Business ( email )

3141 Chestnut Street
Philadelphia, PA 19104
United States
2158956673 (Phone)
2158956975 (Fax)

HOME PAGE: http://faculty.lebow.drexel.edu/HammoudehS/

Ramazan Sari

Middle East Technical University (METU)

Ankara, 06531
Turkey

Tengdong Liu

Drexel University - Bennett S. LeBow College of Business ( email )

101 N. 33rd St.
Philadelphia, PA 19104
United States
2158956673 (Phone)
2159856975 (Fax)

Mehmet Uzunkaya

TR Prime Ministry State Planning Organization ( email )

Necatibey Cad. No:108
Ankara, 06100
Turkey

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