Abstract
This paper investigates the impact of the US stock market on the co-movements among the BRIC stock markets using conditional Granger causality which allows a comprehensive exploration on direct and indirect causality. The results from linear conditional causality test show a strong influence of the US stock market on the co-movements of BRIC. Our findings identify the US stock market which is the main inner factor making major contributions to the co-movements among the BRIC stock markets. Further, this study provides robust evidence that the co-movements cannot be significantly influenced by the common information factor. These findings show a more complete picture of the relationships between the US and the BRIC stock markets, offering important implications for policymakers and investors.
Highlights
The aim of this paper is to explore how the United States (US) stock market affects the co-movements of the BRIC stock markets
This paper investigates the impact of the US stock market on the co-movements among the BRIC stock markets using conditional Granger causality which allows a comprehensive exploration on direct and indirect causality
The results show that when we examine the co-movements, we cannot ignore the effect of the US market, which definitely have a great influence on the linkage among the BRIC stock markets
Summary
The aim of this paper is to explore how the US stock market affects the co-movements of the BRIC stock markets. Limited studies investigate the influence of the US market on the dependencies among the BRIC stock markets. Understanding the impact of the US stock market on the co-movements of BRIC stock markets allows investors to assess how it affects domestic and international portfolio diversification exposed to risks of stock price volatility. In this case, investors can adjust their asset allocation decisions according to the dynamic interactions between stock markets. Policymakers can formulate and implement appropriate management regulations to effectively cushion the impact of sharp fluctuations in the US stock market on the BRIC countries
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