Integration among the BRICS stock markets: Filtering out global factors

Abstract

ABSTRACT Despite the prominence of the BRICS bloc, little attention has been given to their stock market co-movement. This study investigates the time- and frequency-varying integration of the BRICS stock markets including new BRICS + members with active markets. We explore whether market integration is driven by common exposure to global factors using the DCC-GARCH model and wavelet coherence. Results show that removing global influences reduces variation, range and, for some country pairs, magnitude in correlations. The markets of India and Russia are most integrated with other markets in the bloc, while the markets of China and Brazil are most segmented from others in the bloc. New BRICS members, Saudi Arabia, Egypt and the United Arab Emirates, exhibit strong integration with some original bloc members. Crisis impacts are more systemic rather than specific to market linkages, with stable co-movements after filtering returns. Wavelet analysis shows that most integration between markets occurs over longer horizons. These findings have implications for portfolio construction and policymakers tasked with financial stability.