Hype vs Reality on US and BRICS stock markets going their separate ways: post-crisis evidence

  • Received April 24, 2018;
    Accepted May 29, 2018;
    Published June 5, 2018
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  • Article Info
    Volume 15 2018, Issue #2, pp. 203-212
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    1 articles

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This paper examines the long-term relationship between BRICS and US stock markets by employing the cointegration technique and Granger causality to investigate the cointegration and causality direction in the capital markets. The impulse response function it is also employed to evaluate the persistence of the shocks. In the analysis, daily spot stock index returns are used from 2010 till 2017. The main findings of the cointegration analysis indicate that the US and BRICS stock markets are cointegrated and at least one cointegration vector exists among them. The Granger causality test shows that unidirectional causality runs from the US market towards the Russian, South African and Indian stock markets, while there is a bidirectional causal relation between US and Brazil stock markets.

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    • Figure 1. Stationary series data at first differences
    • Figure 2. Impulse response function outcomes
    • Table 1. Basic statistical properties of US and BRICS stock market indices, 2010–2017
    • Table 2. Correlation matrix
    • Table 3. Unit root tests
    • Table 4. Johansen cointegration test results
    • Table 5. Pairwise Granger causality test