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A cross-country and country-specific modelling of stock market performance, bank development and global equity index in emerging market economies: A case of BRICS countries.

ABSTRACT: This study investigated in cross-country and panel form the interactions of bank development, stock market development and global equity index, focusing on the BRICS countries covering the period 1990 to 2018. We found a bidirectional causation between bank development (CPSGDP) and stock market performance as proxied by the depth of the markets (MCAPGDP) in the BRICS countries. Cointegration was also found using the panel cointegration framework and the bounds test for the ARDL estimators. This largely proves that a long-run relationship of both direct and reverse nature exists between bank development and stock market performance. For the bank development and market performance models respectively, all the error-correction terms were found to be negatively significant, indicating that they both share dynamic profile and adjust appreciably to deviations from equilibrium between the short run and the long run. The global equity index showed that stock market development interacts more with the global financial environment than bank development in the BRICS countries. Our findings support the complementarity and coevolution hypothesis in the stock market and bank development nexus.

SUBMITTER: Kalu EU

PROVIDER: S-EPMC7654802 | biostudies-literature | 2020

REPOSITORIES: biostudies-literature

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A cross-country and country-specific modelling of stock market performance, bank development and global equity index in emerging market economies: A case of BRICS countries.

Kalu Ebere Ume EU Arize Augustine C AC Okoro Okoro E U OEU Onaga Florence Ifeoma FI Alio Felix Chukwubuzo FC

PloS one 20201110 11

This study investigated in cross-country and panel form the interactions of bank development, stock market development and global equity index, focusing on the BRICS countries covering the period 1990 to 2018. We found a bidirectional causation between bank development (CPSGDP) and stock market performance as proxied by the depth of the markets (MCAPGDP) in the BRICS countries. Cointegration was also found using the panel cointegration framework and the bounds test for the ARDL estimators. This ...[more]

PMID: 33170843

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Project description:Stock market, is one of the most important financial market which has a close relationship with a country's economy, due to which it is often called the barometer of the economy. Over the past 25 years, the stock markets have been affected by different global economic shocks. Various researchers have analyzed different aspects of these effects one by one, however, this study is an assessment of stock market interrelationship of emeriging Asian economies which include most of the East Asian, and Southeast Asian emerging economies with special focus on China for past decades during which different crisis occurred. We used Morgan Stanley capital international (MSCI) daily indices data for each stock market and compared Chinese stock market with the stock markets of India, Pakistan, Malaysia, Singapore, and Indonesia. We analyzed the data through the individual wavelet power spectrum, cross-wavelet transform and wavelet coherence, to determine the correlation and volatility among the selected stock markets. These model have the power to analyze co-movements among these countries with respect to both frequency and time spaces. Our findings show that there are co-movement patterns of higher frequencies during the crises periods of 1997, 2008 and 2015. The dependency strength among the considered economies is noted to increase in the crisis periods, which implies increased short- and long-term benefits for the investors. From a financial point of view, it has been determined that the co-movement strength among the emerging economies of Asia may have an effect on the VaR (Value at Risk) levels of a multi-country portfolio. Furthermore, the stock market of China shows a high correlation with the other six Asian stock emerging markets in both high and low-frequency spectrums. The association of the south and east Asian stock market with Chinese stock markets show the interconnection of these economies with the economy of China since past two decades. These findings are useful for investors, portfolio managers and the policymaker around the globe.

Project description:BackgroundSince 2010, five newly emerging economies collectively known as 'BRICS' (Brazil, India, Russia, China and South Africa) have caught the imagination, and scholarly attention, of political scientists, economists and development specialists. The prospect of a unified geopolitical bloc, consciously seeking to re-frame international (and global) health development with a new set of ideas and values, has also, if belatedly, begun to attract the attention of the global health community. But what influence, if any, do the BRICS wield in global health, and, if they do wield influence, how has that influence been conceptualized and recorded in the literature?MethodsWe conducted a systematic literature review in (March-December 2012) of documents retrieved from the databases EMBASE, PubMed/Medline, Global Health, and Google Scholar, and the websites of relevant international organisations, research institutions and philanthropic organisations. The results were synthesised using a framework of influence developed for the review from the political science literature.ResultsOur initial search of databases and websites yielded 887 documents. Exclusion criteria narrowed the number of documents to 71 journal articles and 23 reports. Two researchers using an agreed set of inclusion criteria independently screened the 94 documents, leaving just 7 documents. We found just one document that provided sustained analysis of the BRICS' collective influence; the overwhelming tendency was to describe individual BRICS countries influence. Although influence was predominantly framed by BRICS countries' material capability, there were examples of institutional and ideational influence - particularly from Brazil. Individual BRICS countries were primarily 'opportunity seekers' and region mobilisers but with potential to become 'issue leaders' and region organisers.ConclusionThough small in number, the written output on BRICS influence in global health has increased significantly since a similar review conducted in 2010 found just one study. Whilst it may still be 'early days' for newly-emerging economies influence in global health to have matured, we argue that there is scope to further develop the concept of influence in global health, but also to better understand the ontology of groups of countries such as BRICS. The BRICS have made a number of important commitments towards reforming global health, but if they are to be more than a memorable acronym they need to start putting those collective commitments into action. Keywords BRICS, global health, influence, newly emerging economies, Brazil, Russia, India, China, South Africa.

Project description:Highlights • Spillovers, portfolio allocation and diversification potential of bank returns are examined.• Spillover index, tail-event driven network and nonlinear portfolio optimization are applied to bank returns data.• Spillovers among banks from emerging America are noticeably smaller than those from developed America.• The largest emerging market spillover transmitters and receivers are the banks from Brazil.• Portfolio of banks from emerging America offers greater diversification potential and lower portfolio allocation risk. We examine the network spillovers, portfolio allocation characteristics and diversification potential of bank returns from developed and emerging America. We draw our results by applying a directional spillover index, the tail-event driven network (TENET) and nonlinear portfolio optimization methods on bank returns. We find that the spillovers and connectedness among banks from emerging America are noticeably smaller than those among banks from developed America. The largest emerging market spillover transmitters and receivers are the banks from Brazil, followed by the banks from Chile. The largest developed market spillover transmitter is JP Morgan Chase. The connectedness among banks from developed America is dominated by the banks from the USA, relative to those from Canada. The total connectedness of the emerging market banks is more intensified than that of the banks from developed America due to the effect of the COVID-19 pandemic. The portfolio optimization shows that in developed America, the largest banks from the USA are the largest risk contributors to total portfolio risk, whereas the banks from Canada contribute the least risk. In emerging America, the banks from Brazil contribute the most risk to total portfolio risk while the banks from Peru and one bank from Colombia contribute the least risk. The portfolio of banks from emerging America offers greater diversification potential and lower total portfolio allocation risk.

Dataset Information

A cross-country and country-specific modelling of stock market performance, bank development and global equity index in emerging market economies: A case of BRICS countries.

Publications

A cross-country and country-specific modelling of stock market performance, bank development and global equity index in emerging market economies: A case of BRICS countries.

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