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Fear Linkages Between the US and BRICS Stock Markets: A Frequency-Domain Causality

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  • Elie Bouri
  • Donald Lien
  • David Roubaud
  • Syed Jawad Hussain Shahzad
Abstract
We employ a spectral causality approach to uncover short-, medium-, and long-run causal relations between the US implied volatility index and the five individual implied volatility indexes of BRICS markets from 16th March 2011 to 31st January 2018. We show that the volatility causal relations differ between the short and long run in many cases. Although the results indicate the dominant role played by US uncertainty in shaping uncertainty in all BRICS markets, there is also evidence of a feedback effect from Brazil, Russia, and China to the US that differs across the spectrum. The implications for hedging and risk management practices are explored.

Suggested Citation

  • Elie Bouri & Donald Lien & David Roubaud & Syed Jawad Hussain Shahzad, 2018. "Fear Linkages Between the US and BRICS Stock Markets: A Frequency-Domain Causality," International Journal of the Economics of Business, Taylor & Francis Journals, vol. 25(3), pages 441-454, September.
    • Handle: RePEc:taf:ijecbs:v:25:y:2018:i:3:p:441-454
    DOI: 10.1080/13571516.2018.1505241
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    Citations

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    Cited by:

    1. Ma, Rui & Anderson, Hamish D. & Marshall, Ben R., 2019. "Risk perceptions and international stock market liquidity," Journal of International Financial Markets, Institutions and Money, Elsevier, vol. 62(C), pages 94-116.
    2. Dai, Zhifeng & Zhu, Haoyang, 2023. "Dynamic risk spillover among crude oil, economic policy uncertainty and Chinese financial sectors," International Review of Economics & Finance, Elsevier, vol. 83(C), pages 421-450.
    3. Shahzad, Syed Jawad Hussain & Bouri, Elie & Hernandez, Jose Areola & Roubaud, David, 2021. "Causal nexus between crude oil and US corporate bonds," The Quarterly Review of Economics and Finance, Elsevier, vol. 80(C), pages 577-589.
    4. Le, Thai-Ha & Boubaker, Sabri & Bui, Manh Tien & Park, Donghyun, 2023. "On the volatility of WTI crude oil prices: A time-varying approach with stochastic volatility," Energy Economics, Elsevier, vol. 117(C).
    5. Dai, Zhifeng & Zhu, Haoyang, 2022. "Time-varying spillover effects and investment strategies between WTI crude oil, natural gas and Chinese stock markets related to belt and road initiative," Energy Economics, Elsevier, vol. 108(C).
    6. Muhammad Abubakr Naeem & Mudassar Hasan & Abraham Agyemang & Md Iftekhar Hasan Chowdhury & Faruk Balli, 2023. "Time‐frequency dynamics between fear connectedness of stocks and alternative assets," International Journal of Finance & Economics, John Wiley & Sons, Ltd., vol. 28(2), pages 2188-2201, April.
    7. Juan Andres Rodriguez-Nieto & Andre V. Mollick, 2021. "The US financial crisis, market volatility, credit risk and stock returns in the Americas," Financial Markets and Portfolio Management, Springer;Swiss Society for Financial Market Research, vol. 35(2), pages 225-254, June.
    8. Klaus, Jürgen & Koser, Christoph, 2021. "Measuring Trump: The Volfefe Index and its impact on European financial markets," Finance Research Letters, Elsevier, vol. 38(C).
    9. Chatziantoniou, Ioannis & Filippidis, Michail & Filis, George & Gabauer, David, 2021. "A closer look into the global determinants of oil price volatility," Energy Economics, Elsevier, vol. 95(C).
    10. Choi, Sun-Yong, 2022. "Credit risk interdependence in global financial markets: Evidence from three regions using multiple and partial wavelet approaches," Journal of International Financial Markets, Institutions and Money, Elsevier, vol. 80(C).
    11. Hung, Ngo Thai & Vo, Xuan Vinh, 2021. "Directional spillover effects and time-frequency nexus between oil, gold and stock markets: Evidence from pre and during COVID-19 outbreak," International Review of Financial Analysis, Elsevier, vol. 76(C).

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