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Time-frequency domain analysis of investor fear and expectations in stock markets of BRIC economies

The purpose of this study is to provide insight into the lead-lag relationships between the BRIC stock index and its constituents. In addition, we assess the comovements between the US volatility index (VIX) as a measure of investor uncertainty and fear and stock returns of BRIC economies. Therefore...

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Autores principales: Owusu Junior, Peterson, Adam, Anokye M., Asafo-Adjei, Emmanuel, Boateng, Ebenezer, Hamidu, Zulaiha, Awotwe, Eric
Formato: Online Artículo Texto
Lenguaje:English
Publicado: Elsevier 2021
Materias:
Acceso en línea:https://www.ncbi.nlm.nih.gov/pmc/articles/PMC8564565/
https://www.ncbi.nlm.nih.gov/pubmed/34754971
http://dx.doi.org/10.1016/j.heliyon.2021.e08211
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author Owusu Junior, Peterson
Adam, Anokye M.
Asafo-Adjei, Emmanuel
Boateng, Ebenezer
Hamidu, Zulaiha
Awotwe, Eric
author_facet Owusu Junior, Peterson
Adam, Anokye M.
Asafo-Adjei, Emmanuel
Boateng, Ebenezer
Hamidu, Zulaiha
Awotwe, Eric
author_sort Owusu Junior, Peterson
collection PubMed
description The purpose of this study is to provide insight into the lead-lag relationships between the BRIC stock index and its constituents. In addition, we assess the comovements between the US volatility index (VIX) as a measure of investor uncertainty and fear and stock returns of BRIC economies. Therefore, the bi-wavelet and wavelet multiple correlations approaches are utilised. Findings from the bi-wavelet technique indicate that there are high interdependencies between the BRIC index and its constituents throughout the time-frequency domain. In addition, comovements between the BRIC index and its constituents was positive and significant. Notwithstanding, we find the BRIC index to be the first variable to respond to shocks when all the study variables were considered in the wavelet multiple cross-correlations. Similarly, the stock market of Brazil is the next to respond to shocks. On the other hand, the stock market of Russia lags in the long-term when the BRIC index was excluded from the wavelet multiple cross-correlations. We also find a uni-directional causality between the VIX and the BRIC stocks in the medium-, and long-terms. Specifically, the US VIX significantly drives the BRIC stocks and considered to be negative. Findings from the study imply that global investors can select any of the stock markets in BRIC to allocate their investments due to their strong interdependencies which may facilitate trade and investments. However, portfolio diversification, safe haven or hedge benefits within this region may be minimal due to their high integration with the BRIC index which demonstrates positive significant comovements. The findings present relevant inferences for portfolio diversification, policy decisions, and risk management schemes. It is recommended that investors hedge against volatilities in the BRIC stock markets using the US VIX.
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spelling pubmed-85645652021-11-08 Time-frequency domain analysis of investor fear and expectations in stock markets of BRIC economies Owusu Junior, Peterson Adam, Anokye M. Asafo-Adjei, Emmanuel Boateng, Ebenezer Hamidu, Zulaiha Awotwe, Eric Heliyon Review Article The purpose of this study is to provide insight into the lead-lag relationships between the BRIC stock index and its constituents. In addition, we assess the comovements between the US volatility index (VIX) as a measure of investor uncertainty and fear and stock returns of BRIC economies. Therefore, the bi-wavelet and wavelet multiple correlations approaches are utilised. Findings from the bi-wavelet technique indicate that there are high interdependencies between the BRIC index and its constituents throughout the time-frequency domain. In addition, comovements between the BRIC index and its constituents was positive and significant. Notwithstanding, we find the BRIC index to be the first variable to respond to shocks when all the study variables were considered in the wavelet multiple cross-correlations. Similarly, the stock market of Brazil is the next to respond to shocks. On the other hand, the stock market of Russia lags in the long-term when the BRIC index was excluded from the wavelet multiple cross-correlations. We also find a uni-directional causality between the VIX and the BRIC stocks in the medium-, and long-terms. Specifically, the US VIX significantly drives the BRIC stocks and considered to be negative. Findings from the study imply that global investors can select any of the stock markets in BRIC to allocate their investments due to their strong interdependencies which may facilitate trade and investments. However, portfolio diversification, safe haven or hedge benefits within this region may be minimal due to their high integration with the BRIC index which demonstrates positive significant comovements. The findings present relevant inferences for portfolio diversification, policy decisions, and risk management schemes. It is recommended that investors hedge against volatilities in the BRIC stock markets using the US VIX. Elsevier 2021-10-19 /pmc/articles/PMC8564565/ /pubmed/34754971 http://dx.doi.org/10.1016/j.heliyon.2021.e08211 Text en © 2021 The Author(s) https://creativecommons.org/licenses/by/4.0/This is an open access article under the CC BY license (http://creativecommons.org/licenses/by/4.0/).
spellingShingle Review Article
Owusu Junior, Peterson
Adam, Anokye M.
Asafo-Adjei, Emmanuel
Boateng, Ebenezer
Hamidu, Zulaiha
Awotwe, Eric
Time-frequency domain analysis of investor fear and expectations in stock markets of BRIC economies
title Time-frequency domain analysis of investor fear and expectations in stock markets of BRIC economies
title_full Time-frequency domain analysis of investor fear and expectations in stock markets of BRIC economies
title_fullStr Time-frequency domain analysis of investor fear and expectations in stock markets of BRIC economies
title_full_unstemmed Time-frequency domain analysis of investor fear and expectations in stock markets of BRIC economies
title_short Time-frequency domain analysis of investor fear and expectations in stock markets of BRIC economies
title_sort time-frequency domain analysis of investor fear and expectations in stock markets of bric economies
topic Review Article
url https://www.ncbi.nlm.nih.gov/pmc/articles/PMC8564565/
https://www.ncbi.nlm.nih.gov/pubmed/34754971
http://dx.doi.org/10.1016/j.heliyon.2021.e08211
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