The Changing Role of Financial Stress, Oil Price, and Gold Price in Financial Contagion among US and BRIC Markets

Date

2019-09-01

Author

Kocaarslan, Baris
Soytaş, Uğur
Sarı, Ramazan
Ugurlu, Ecenur

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This work is licensed under a Creative Commons Attribution-NonCommercial-NoDerivatives 4.0 International License.

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The objective of this paper is to explore the determining factors behind financial contagion between US and BRIC (Brazil, Russia, India, and China) equity markets. To this end, we investigate the effects of global macroeconomic factors on the time-varying correlations among these markets obtained by asymmetric dynamic conditional correlation method. Utilizing quantile regression analysis, we examine the determinants of financial contagion at different levels of time-varying correlations. The results of quantile regression analyses reveal that global financial crisis (GFC) (2008) leads to changes in the dependence structure between dynamic conditional correlations among equity markets and global macroeconomic factors, such as global financial stress, oil prices, and gold prices. Following the GFC, monetary, and fiscal policy changes in the BRIC markets and hence changing macroeconomic risks of these markets are conducive to these changes. Our findings also demonstrate the importance of cross-market rebalancing channel for information transmission across US and BRIC markets.

Subject Keywords

Stock-market, Time-series, Conditional heteroskedasticity, Expected returns, Equity returns, Asset returns, Unit-root, Crisis, Volatility, Integration

URI

https://hdl.handle.net/11511/33275

Journal

INTERNATIONAL REVIEW OF FINANCE

DOI

https://doi.org/10.1111/irfi.12189

Collections

Department of Business Administration, Article

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Citation Formats

B. Kocaarslan, U. Soytaş, R. Sarı, and E. Ugurlu, “The Changing Role of Financial Stress, Oil Price, and Gold Price in Financial Contagion among US and BRIC Markets,” INTERNATIONAL REVIEW OF FINANCE, pp. 541–574, 2019, Accessed: 00, 2020. [Online]. Available: https://hdl.handle.net/11511/33275.