Exploring Contemporaneous Correlations Among BRICS Stock Markets

Abstract

In the current paper, the author has used daily closing price data of the selected equity indices of the five BRICS countries from a period of 2010 to 2017 to understand the extent of co-movement among them and to evaluate the existence of portfolio diversification opportunities they present together. Econometric tools have been used to diagnose unidirectional and/or bidirectional causality, long-run co-movement and short-run contemporaneous correlations among these markets. The findings reveal potentially profitable investment prospects. Vigour of the results has been tested in two ways. First, Granger causality and VAR estimates have been retested for a different time horizon using daily data from 2000 to 2007. The second robustness check has been done by evaluating the outcome of VAR by changing the Cholesky ordering for the data from 2010 to 2017.