Spillover Effect Due To Macroeconomic Variables: Evidence From Volatility In BRICS Nations

Abstract

The volatility driven by transitions in macroeconomic conditions presents a strong chance for quick gains. Since macroeconomic factors have a consistent knock on stock market returns, it is crucial to comprehend how the two are related to one another[1]. However, risk-averse investors should always use a long-term investing strategy because stock markets have a history of offering superior returns over the long run. This paper aims to study the GDP, FDI, Inflation, and money supply and their impact on the volatility in the BRICS nations. For analysis, the VECM and VAR models are prepared. The models state relationship among the GDP, FDI, Inflation, and money supply and Stock markets of Brazil, Russia, India, and China. However, in the case of South Africa, these economic variables have a dynamic correlation with its stock market index as is depicted through the VAR Model.