Better to Give than to Receive: A Study of BRICS Countries Stock Markets

Abstract

This study uses the MGARCH-BEKK model and Diebold–Yilmaz (DY) volatility spillover index to examine volatility spillovers among BRICS countries’ stock markets. The study finds that the own volatility spillover is more than the cross-markets and has increased during the financial crisis. In contrast, the cross-markets volatility spillovers have decreased after the financial crisis. The total net return spillover increased during the crisis period (27.30%) and the pre-crisis period (25.50%) in comparison with the post-crisis period (6.30%) and the whole sample period (10.70%). Brazil is the highest net volatility transmitter among the BRICS countries’ stock markets, and China is the highest net volatility receiver. We learned from the volatility network connectedness that China is highly connected with India regarding volatility. Foreign institutional investors may use this study’s result to find diversification opportunities across the BRICS stock markets. JEL Codes: F3, G11, G12, G15