Abstract
Brazil, Russia, India and China (BRIC) are pointed as the most probable countries to enter the select group of industrialised countries, also appearing among the world’s twelve largest economies. The main objective of the present study is to assess whether the capital market behaviour of the BRIC’s emerging countries in the 2008 international crisis had already been equivalent to that of industrialised countries (USA, Japan, United Kingdom, and Germany). Three univariate approaches were applied for modelling the market volatilities (GARCH, EGARCH and TARCH). The results showed similar behaviours between both market groups regarding the presence of persistent effects of shocks on volatility, volatility asymmetry, and delayed volatility reaction to market changes. The BRIC’s markets showed less persistence to volatility shocks, less asymmetry, and faster reactions of volatility to market changes. Key words: Volatility, BRIC, emerging markets, GARCH models, financial crisis.
Highlights
IntroductionPropagation of a crisis occurs through the naturally existing linkage among the countries’ markets
Countries, closer to that have the most developed economies in the world, can mean significant changes in destinations of foreign capital flows, in the attitude of international investors, the cost of capital for these countries and their businesses, leverage levels prevailing in these economies, the composition of investment portfolios in investment volumes, in crucial respects to the consolidation of a new map of the distribution of wealth, economic stability profile, and vectors of development, growth and technological advancement in the world
To show the behavior of capital markets of the BRIC countries is already similar, or closer, the behavior of developed markets, this study examined the period surrounding the international financial crisis of 2008, two important aspects: it is during crises the differences and similarities between emerging and developed markets, are lighter, and because the crisis is recent and coincided with the historical event and innovative invitation to the BRIC countries to make up the select group called G20 and the new Council Permanent International Economic
Summary
Propagation of a crisis occurs through the naturally existing linkage among the countries’ markets. This linkage occurs in various fronts, either by means of external trade, international private investments or even sovereign capital flows. Transactions between countries occur around what one considers to be a balance platform, which is dynamic and consists of economic variables related to exchange parities, interest rate levels, inflation, foreign currency reserves, production, consumption, income, among others. Value and parity references are lost, governments become protectionist, and capital flows occur for preserving and honouring positions only, curiously seeming to be more aligned as if there was a greater integration of the investors’ behaviour around the world
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