Title: The predictability, volatility persistence, and leverage effects in stock market returns: a study of BRICS stock market indices

Authors: Bashir Ahmad Joo; Younis Ahmed Ghulam

Addresses: Department of Management Studies, University of Kashmir, Chattabal Srinagar Kashmir, 190010, India ' Department of Management Studies, University of Kashmir, Chattabal Srinagar Kashmir, 190010, India

Abstract: This study examines the phenomena of predictability, persistence in volatility, and leverage effect in the stock returns of BRICS nations. This paper also evaluates the distributions and asymmetric volatility models before modelling volatility. We apply SGARCH using normal, student-t, and skewed student-t distributions and stationarity tests to check the volatility persistence and predictability. The study also modelled GJR-GARCH, EGARCH, and APARCH under normal, student-t, and skewed student-t distributions to estimate the leverage effect. The SGARCH analysis and stationarity test results validated the presence of volatility persistence, and predictability. The results also indicated that 'skewed student-t distribution' is the best distribution for modelling both symmetric and asymmetric volatility models, and the GJR-GARCH model is the best for estimating the leverage effect. The findings of the GJR-GARCH model suggested significant leverage effects in Brazil, India, and Africa, with a relatively insignificant leverage effect in Russia and no leverage effect in China.

Keywords: volatility clusters; predictability; volatility persistence; leverage effect; GARCH; GJR-GARCH; APARCH; EGARCH; investment decisions.

DOI: 10.1504/AJFA.2023.136686

American Journal of Finance and Accounting, 2023 Vol.7 No.3/4, pp.188 - 213

Accepted: 03 Sep 2023
Published online: 16 Feb 2024 *

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