VOLATILITY SPILLOVER AND CONTAGION EFFECT FROM USA TO BRIC COUNTRIES: A DIAGONAL VECH MATRIX AND EGARCH (1,1) APPROACH

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Published: 2015-09-17

Page: 44-53


M. TALHATUL ISLAM *

North South University, Plot # 15, Block-B, Bashundhara, Dhaka-1229, Bangladesh.

TANVIR EBNE BASHAR

North South University, Plot # 15, Block-B, Bashundhara, Dhaka-1229, Bangladesh.

*Author to whom correspondence should be addressed.


Abstract

This paper examines the level of incorporation and the dynamic association amongst the BRIC countries, their corresponding regions and the world. We find that Brazil and India demonstrate the uppermost level of regional and global incorporation between the BRIC countries, followed by Russia and China. There is a negative association amongst the location conditional volatility of India with that of the Asia-Pacific province and of China with the world, which shows an existence of diversification prospects for portfolio investors. Portfolio investors can linger to receive sound yields from taking positions in the indices of these countries. On the other hand, for an outstanding investment performance, investors should consider investing in specific areas of growth within the economy rather than the country index. Using EGARCH models subsidy from no parameter limitations, thus the probable volatilities of optimization procedures are abridged. Major findings of this research show compelling evidence highlighting the weak volatility transmission from USA to Chinese and Russian markets. And moderately high level of contagion and spillover effect exists with Brazilian & Indian stock markets. There is also evidence that Brazilian indices adjust itself very quickly following a catastrophic event and Chinese indices reacts the most with the transmission of negative information.

Keywords: BRIC, VECH, EGARCH, contagion, volatility spillover


How to Cite

ISLAM, M. T., & BASHAR, T. E. (2015). VOLATILITY SPILLOVER AND CONTAGION EFFECT FROM USA TO BRIC COUNTRIES: A DIAGONAL VECH MATRIX AND EGARCH (1,1) APPROACH. Journal of Global Economics, Management and Business Research, 5(1), 44–53. Retrieved from https://ikprress.org/index.php/JGEMBR/article/view/1886

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