publications
Article
Stock market volatility spillovers and portfolio hedging: BRICS and the financial crisis  |
Beljid Makram, Boubaker Adel, 2015 |
International Review of Financial Analysis, 39, xxx, 7-18, Mai 2015 |
Résumé
The paper investigates the dynamic risk-return properties of the BRICS (Brazil, Russia, India, China,
South Africa) capital markets and models potential time-varying correlations and volatility spillover
effects with the US stock market. A VAR(1)-GARCH(1,1) framework contributes useful insight into
US-BRICS market interactions and expands on a thin past empirical literature. A disaggregated
approach pays attention to critical US-BRICS business sectors, namely the industrial and financial
sectors. Significant return and volatility transmission dynamics are identified between the US and
BRICS stock markets and business sectors. This is a critical input that can affect efficient global
portfolio diversification and risk management strategies. Based on this empirical evidence, the study
proceeds to assess effective portfolio hedge ratios and to construct optimal portfolio weights for
diversified asset allocation to US-BRICS markets and business sectors.
The paper investigates the dynamic risk-return properties of the BRICS (Brazil, Russia, India, China,South Africa) capital markets and models potential time-varying correlations and volatility spillovereffects with the US stock market. A VAR(1)-GARCH(1,1) framework contributes useful insight intoUS-BRICS market interactions and expands on a thin past empirical literature. A disaggregatedapproach pays attention to critical US-BRICS business sectors, namely the industrial and financialsectors. Significant return and volatility transmission dynamics are identified between the US andBRICS stock markets and business sectors. This is a critical input that can affect efficient globalportfolio diversification and risk management strategies. Based on this empirical evidence, the studyproceeds to assess effective portfolio hedge ratios and to construct optimal portfolio weights fordiversified asset allocation to US-BRICS markets and business sectors.
