THE ASYMMETRIC LINKAGES BETWEEN SOVEREIGN CDS SPREADS AND STOCK MARKET INDICES IN THE PERIOD COVERING THE COVID-19 PANDEMIC: EVIDENCE FROM THE BRIC COUNTRIES

This paper analyses the asymmetric linkages between the credit default swap (CDS) spreads and stock market indices for the BRIC countries which include Brazil, Russia, India, and China for the period of 2013:12-2021:03. We use the data of Bovespa, Moex, Shanghai, and Sensex stock market indices and CDS spreads obtained from the Bloomberg terminal. In our analysis, we employ the Hatemi-J (2012) asymmetric causality test which considers positive and negative shocks might have different causal effects between variables. Our findings support the evidence of causality relationships between CDS spreads and stock market indices for the BRIC countries in the relevant period suggesting that the CDS spreads can be used for anticipating the movements in stock market indices. Furthermore, we obtain meaningful results for particularly Russia and Brazil. Accordingly, we notice that the increases in CDS spreads lead to negative changes in stock market indices for Russia, and decreases in CDS spreads lead to positive changes in stock market indices for Brazil. © 2022, Symmetrion. All rights reserved.

Time-Varying Risks in ESG Equity Investments during the COVID-19 Pandemic

We analyse the time-varying risks associated with ESG equity investments in developed, emerging and BRIC equity markets in the wake of the COVID-19 pandemic which has once again underscored the vulnerability of the financial space to shocks. For this purpose, the nonlinear Markov regime switching model is used to analyse the time-varying beta and idiosyncratic volatility of the World ESG Leaders, Emerging Markets ESG Leaders and BRIC ESG Leaders equity portfolios provided by Morgan Stanley Capital International (MSCI). To further complement the evidence, we also refer to the global ACWI ESG Leaders index which represents both developed markets and emerging markets. The evidence suggests that the risk dynamics of the ESG equity portfolios representing the developed markets, emerging markets, BRIC markets and the global markets are distinct during the crisis and calm period. ESG equity investments have higher systematic risk exposure in emerging markets and BRIC markets during the crisis period as well as calm periods. On the other hand, ESG equity investments have higher systematic risk exposure during the crisis period only in case of developed markets. The results of the study provide insights on the time -varying risk dynamics of ESG investing and thus, facilitate informed investment decisions.

Emerging market dynamics in H1N1 and COVID-19 pandemics.

The spread of COVID-19 increased general interest in the effects of pandemics on stock markets. We believe it is interesting to analyze emerging countries due to their role in future economies. The announcement of the H1N1 and COVID-19 pandemics instigated observable effects on the stock market. Our goal is to measure and compare the effects of these announcements, specifically for the BRIC bloc, using the event study method. We find evidence that these stock markets exhibited more negative abnormal returns at the announcement of COVID-19 than at the announcement of H1N1. However, Russia and China seem to cope better with COVID-19, having already experienced H1N1. Due to the possibility of a new pandemic and for the sake of the future participation of emerging countries, it is recommended to deepen this line of research.

Return and volatility spillovers between energy and BRIC markets: Evidence from quantile connectedness

Using the quantile connectedness approach for the median, lower, and upper quantiles, we examine the return and volatility connectedness between energy and BRIC markets from January 1, 2000, to July 9, 2021. We find that uncertain economic activity and intense periods characterize energy and BRIC market returns and volatility connectedness. A parallel return and volatility connectedness structure for upper and lower quantiles against the average quantile revealed different results. Time-varying features are substantiated between energy and BRIC markets;significant distress events, such as the Global Financial Crisis, European Debt Crisis, Shale Oil Revolution, and COVID-19 pandemic, intensified spillovers. We highlight diversification avenues for energy and BRIC markets given the periods of financial turmoil, with investors’ concerns widely addressed by opt-in investment opportunities with lower risk and greater diversification. Our study has beneficial implications for policymakers, regulators, investors, and financial market constituents to redevelop their existing strategies to avoid financial losses.