Vol. 3, Issue 3 (2018)
Causal relationship among the stock markets: An empirical study on BRICS Countries
Author(s): Dr. M Jegadeeshwaran, VM Sangeetha
Abstract: The purpose of this study is to explore the relationship among the BRICS (Brazil, Russia, India, China, South Africa) nation’s stock market. The idea behind the selection of BRICS economies is to know how the stock markets of these prominent countries are related to each other. The study employs daily closing prices of BRICS stock market indices viz., IBOVESPA, RTSI, SENSEX, SSE Composite Index and JSE ALSI for the period from 4th January, 2001 to 1st June 2017. All the selected BRICS stock index returns are stationary at level. All the variables are positively correlated, RTSI and JSE ALSI have a high positive association and IBOVESPA and SSE CI have lowest correlation coefficient during the study period. Granger causality test is applied to identify the presence of predictive variable among the selected stock indices. Unidirectional relationship exists between IBOVESPA and all other markets and there is no relation between JSE ALSI and RTSI. This shows that there is a chance for the investors to diversify their portfolio to other BRICS countries.