The Changing Role of Financial Stress, Oil Price, and Gold Price in Financial Contagion Among US and BRIC Markets

34 Pages Posted: 26 May 2020

See all articles by Baris Kocaarslan

Baris Kocaarslan

affiliation not provided to SSRN

Ugur Soytas

DTU Management

Ramazan Sari

Middle East Technical University (METU)

Ecenur Ugurlu

affiliation not provided to SSRN

Date Written: September 2019

Abstract

The objective of this paper is to explore the determining factors behind financial contagion between US and BRIC (Brazil, Russia, India, and China) equity markets. To this end, we investigate the effects of global macroeconomic factors on the time‐varying correlations among these markets obtained by asymmetric dynamic conditional correlation method. Utilizing quantile regression analysis, we examine the determinants of financial contagion at different levels of time‐varying correlations. The results of quantile regression analyses reveal that global financial crisis (GFC) (2008) leads to changes in the dependence structure between dynamic conditional correlations among equity markets and global macroeconomic factors, such as global financial stress, oil prices, and gold prices. Following the GFC, monetary, and fiscal policy changes in the BRIC markets and hence changing macroeconomic risks of these markets are conducive to these changes. Our findings also demonstrate the importance of cross‐market rebalancing channel for information transmission across US and BRIC markets.

Suggested Citation

Kocaarslan, Baris and Soytas, Ugur and Sari, Ramazan and Ugurlu, Ecenur, The Changing Role of Financial Stress, Oil Price, and Gold Price in Financial Contagion Among US and BRIC Markets (September 2019). International Review of Finance, Vol. 19, Issue 3, pp. 541-574, 2019, Available at SSRN: https://ssrn.com/abstract=3603491 or http://dx.doi.org/10.1111/irfi.12189

Baris Kocaarslan (Contact Author)

affiliation not provided to SSRN

No Address Available

Ugur Soytas

DTU Management ( email )

Produktionstorvet 424
Room 020
Kgs. Lyngby, 2800
Denmark

Ramazan Sari

Middle East Technical University (METU)

Ankara, 06531
Turkey

Ecenur Ugurlu

affiliation not provided to SSRN

No Address Available

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