BRIC and the U.S. financial crisis: An empirical investigation of stock and bond markets |
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| Institution: | 1. Economics Department, Tufts University, United States;2. Economics Department - FEA, University of Sao Paulo, Brazil;1. CREA, University of Luxembourg, Luxembourg;2. IRES, Université Catholique de Louvain, Louvain-la-Neuve, Belgium;1. Department of Shipping, Trade and Transport, School of Business Studies, University of the Aegean, 2A Korai str., 82100 Chios, Greece;2. Audencia Nantes School of Management, 8, Route de la Joneliere, BP 31222, 44312 Nantes, France;3. Department of Finance and Accounting, University of Tunis El Manar, B.P. 248, C.P. 2092, Tunis Cedex, Tunisia |
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| Abstract: | We examine empirical evidence of the behavior of stocks and bonds from BRIC nations by using daily data from January 2003 to July 2010. We present unconditional and conditional empirical results depending upon a simple measure of U.S. financial stress. In the long term, BRIC bond markets deviate much more from the U.S. financial stress measure than the BRIC bonds and stocks that deviate among themselves. Stock and bond return correlations for Brazil and Russia are significantly large and negative. The own correlations are more important in determining the evolution of the conditional correlations relative to unexpected news. Dynamic conditional correlations between stock returns, bond returns and U.S. financial stress increase after the Lehman Brothers' event in September 2008, except for the bond returns in India. |
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