Title: Stock market integration: evidence from BRIC countries

Authors: Naliniprava Tripathy

Addresses: Indian Institute of Management Shillong, Meghalaya, 793 014, India

Abstract: This paper examines the dynamic linkage and integration in between BRIC countries' stock market using daily data from January 2000 to May 2014. The study finds that there is a bi-directional causal relationship exist between Indian and Russian stock market, Brazilian and Russian stock market. Further, Chinese stock market is functioning independently and does not have any causal effect to Indian, Russian and Brazilian stock market. The study reports that there is long run equilibrium relationship existing among all BRIC countries stock market. The study concludes that the movements of stock market return are explained by their own shocks rather than the shocks of other BRIC countries stock market return. The study suggests that increase level of integration of BRIC economics necessitates the need for global investors to follow portfolio stock selection strategy and ascertain specific growth areas within these economics before making investment decision.

Keywords: causality test; Johansen's co-integration test; vector error correction model; VECM; variance decomposition; stock market integration; stock markets; BRIC countries; investment decisions; India; Brazil; Russia; China.

DOI: 10.1504/IJBEM.2015.070334

International Journal of Business and Emerging Markets, 2015 Vol.7 No.3, pp.286 - 306

Received: 13 Jun 2014
Accepted: 20 Aug 2014

Published online: 02 Jul 2015 *

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