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Research on the time-varying network structure evolution of the stock indices of the BRICS countries based on fluctuation correlation

Author

Listed:
  • Dong, Zhiliang
  • An, Haizhong
  • Liu, Sen
  • Li, Zhengyang
  • Yuan, Meng
Abstract
To better discover the evolutionary features of the short-period correlation coefficients for the stock indices of Brazil, Russia, India, China, and South Africa (the BRICS countries), the stock closing price time series data for the last 18 years for the main stock indices of the BRICS countries are selected as the study sample in this paper. By using the sliding window method, the 60-day correlation coefficient of the main stock index series is obtained to construct the stock index time-varying network of the BRICS countries, and the evolution characteristics of the short-term stock index correlation are studied. The results show that, there is a certain positive linkage between BRICS stock indices from 2001 to 2018, but not always. The evolution of the relevant relationship in the BRICS countries is mainly controlled by the key correlation modes, and the regularity is obvious. According to the key modes, it is suggested that investors who prefer a high level of risk in the stock market of the BRICS countries should choose the Brazil or South Africa stock market for portfolio investment; investors who prefer a medium level of risk should choose any combination of the Brazil, Russia, India, and South Africa stock markets for investment; investors who prefer a low level of risk can choose China and a joint investment in four other stock markets. In addition, in a period of time that if there are five stock indices that are all positively correlated, Brazil, Russia, India, and South Africa are all positively correlated, and Brazil, Russia, and South Africa are all positively correlated, it is suggested that investors who prefer a low level of risk should not invest to reduce losses.

Suggested Citation

  • Dong, Zhiliang & An, Haizhong & Liu, Sen & Li, Zhengyang & Yuan, Meng, 2020. "Research on the time-varying network structure evolution of the stock indices of the BRICS countries based on fluctuation correlation," International Review of Economics & Finance, Elsevier, vol. 69(C), pages 63-74.
    • Handle: RePEc:eee:reveco:v:69:y:2020:i:c:p:63-74
    DOI: 10.1016/j.iref.2020.04.008
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