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Asymmetric Linkages between BRICS Stock Returns and Country Risk Ratings: Evidence from Dynamic Panel Threshold Models
Author(s) -
Mensi Walid,
Hammoudeh Shawkat,
Yoon SeongMin,
Nguyen Duc Khuong
Publication year - 2016
Publication title -
review of international economics
Language(s) - English
Resource type - Journals
SCImago Journal Rank - 0.513
H-Index - 58
eISSN - 1467-9396
pISSN - 0965-7576
DOI - 10.1111/roie.12201
Subject(s) - economics , stock (firearms) , econometrics , threshold model , financial economics , panel analysis , panel data , geography , archaeology
This study investigates the asymmetric linkages between the five BRICS (Brazil, Russia, India, China and South Africa) countries’ stock markets and three country risk ratings (financial, economic and political risk) in the presence of major global economic and financial factors. Using the dynamic panel threshold models, we find evidence of asymmetry in most cases. However, the significance and the signs of the effects of these risk ratings on the BRICS market returns differ across the lower and upper regimes. Furthermore, improvements in the global stock, West Texas Intermediate (WTI) and gold markets enhance the BRICS stock market performance. Increases in implied volatility indices lead to drops in the BRICS markets.