Stock Market Interdependence and Contagion: Evidence from BRICS Stock Returns

This paper aims to investigate the interdependence and contagion imposed by the US and EU markets on BRICS based on the residual specification. Using an asymmetric GARCH specification, we find that Brazil, India and South Africa are significantly dependent on the US and EU markets. The empirical results shows highly significant contagion from the US market to BRICS but no contagion from the EU market to BRICS. Chinese market stays immune to the US and EU markets and marginal contagion effect from the US market. There exists structural break in interdependence imposed by the Global Financial Crisis on India and South Africa. However, only Brazilian contagion from the US market is significantly affected by Global Financial Crisis.