Efficiency of Emerging and Emerged Capital Markets: An Empirical Study on BRICS and G7 Nations

Authors

  • M. Babu
  • C. Hariharan
  • S. Srinivasan

DOI:

https://doi.org/10.33516/rb.v42i1.61-77p

Keywords:

BRICS, G7, Indices, Integration, GARCH (1, 1) Model, Johansen Co Integration Test, Vector Error Correction Model and Granger Causality Test.

Abstract

The study proposes to investigate the stock markets linkages between BRICS and G7 nations' during the study period from April 2004 to March 2014. GARCH (1, 1) Model examined the daily returns of sample indices BSE SENSEX, FTSE/JSE TOP 40, IBOVESPA, RTS INDEX, SSE COMPOSITE (BRICS) and CAC 40, FTSE 100, FTSE MIB, GDAXI, NIKKEI 225, NYSE COMPOSITE, S&P TSX COMPOSITE (G7) and found them to be volatile. Results of Johansen Co Integration Test found that BRICS and G7 nations' stock market indices were co integrated and there was long run relationship between BRICS and G7 stock indices. VECM results showed some BRICS indices to experience short run relationship with G7 indices. Results of Granger Causality Test found only one bidirectional relationship between RTS INDEX and FTSE MIB while FTSE/ JSE TOP 40 recorded unidirectional relationship with NYSE COMPOSITE and S&P TSX COMPOSITE, followed by NIKKEI 225 and IBOVESPA, SSE COMPOSITE and CAC 40, FTSE MIB and SSE COMPOSITE. The overall results revealed both long run and short run linkages between BRICS and G7 nations' stock market indices during the study period. International investors could use the opportunity for portfolio diversification, at both long run and short run periods, in BRICS and G7 stock markets as the long run and short run relationship existed in BRICS and G7 stock markets during the study period.

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Published

2016-04-01

How to Cite

Babu, M., Hariharan, C., & Srinivasan, S. (2016). Efficiency of Emerging and Emerged Capital Markets: An Empirical Study on BRICS and G7 Nations. Research Bulletin, 42(1), 61–77. https://doi.org/10.33516/rb.v42i1.61-77p

Issue

Volume 42, Issue 1, April 2016

Section

Articles
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Europe PMC

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