Does global fear predict fear in BRICS stock markets? Evidence from a Bayesian Graphical Structural VAR model
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Authors
Bouri, Elie
Gupta, Rangan
Hosseini, Seyedmehdi
Lau, Chi Keung Marco
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Publisher
Elsevier
Abstract
We examine the predictive power of implied volatility in the commodity and major developed stock markets for the implied volatility in individual BRICS stock markets. We use daily data from March 2011 to October 2016 and employ the newly developed Bayesian Graphical Structural Vector Autoregressive (BGSVAR) model of Ahelegbey et al. (2016). Evidence suggests that the predictability of individual implied volatilities in BRICS is generally a function of both global and within the group stock market implied volatilities, and that the role of commodity market volatility is marginal, except for South Africa. Important implications for policy-makers and portfolio-managers are discussed.
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Keywords
Bayesian graphical structural vector autoregressive (BGSVAR), Brazil, Russia, India, China and South Africa (BRICS), Volatility predictability, Implied volatility index, VIX, Strategic commodities, Gold, Countries, Commodity futures markets, Oil price, Empirical analysis, Trending time series, Hedging effectivenes, Unit root model, Financial crisis
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Citation
Bouri, E., Gupta, R., Hosseini, S. & Lau, C.K.M. 2018, 'Does global fear predict fear in BRICS stock markets? Evidence from a Bayesian Graphical Structural VAR model', Emerging Markets Review, vol. 34, pp. 124-142.