Directional spillover effects between BRICS stock markets and economic policy uncertainty. (English) Zbl 1495.91115
Summary: In recent years, researchers have increasingly studied the association between the stock market and economic policy uncertainty (EPU). To have more profound knowledge, this paper investigates the evolution of the mean spillover effects between EPU and BRICS stock markets by employing both the multivariate DECO-GARCH model proposed by R. Engle and B. Kelly [“Dynamic equicorrelation”, J. Business & Econ. Stat. 30, No. 2, 212–228 (2012; doi:10.1080/07350015.2011.652048)] and the spillover index of F. X. Diebold and K. Yilmaz [“Better to give than to receive: predictive directional measurement of volatility spillovers”, Int. J. Forecasting 28, No. 1, 57–66 (2012; doi:10.1016/j.ijforecast.2011.02.006)]. The results uncover that the average return equicorrelation between the BRICS stock indices and EPU is positive. In addition, there is a bidirectional return spillover between EPU and BRICS stock returns in the aftermath of the recent European debt crises and the global financial crisis. Overall, our results reveal the existence of the short term, the pass-through impact of EPU via stock price fluctuation in BRICS countries. These findings might provide significant implications for portfolio managers, investors, and government agencies.
MSC:
| 91G15 | Financial markets |
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