TY - JOUR
T1 - A momentum threshold model of stock prices and country risk ratings
T2 - Evidence from BRICS countries
AU - Liu, Tengdong
AU - Hammoudeh, Shawkat
AU - Thompson, Mark A.
PY - 2013/12
Y1 - 2013/12
N2 - We develop a multivariate momentum threshold autoregression (MTAR) model that examines the relationship between stock markets for each of the five BRICS countries - Brazil, Russia, India, China and South Africa - and changes in their economic, financial and political country risk ratings in response to positive and negative shocks. The findings suggest that the long-run and short-run relationships between the stock market and the three risk ratings variables of each country respond asymmetrically to shocks for all of the five BRICS, but at different speeds and depending on the direction of the shock, underpinning the differences in profit opportunities among these countries. The adjustment is faster for the individual BRICS following a positive shock (than a negative shock), except for Russia. Despite their grouping, the stock markets of the five BRICS countries are dissimilar and can add to diversification benefits in portfolios.
AB - We develop a multivariate momentum threshold autoregression (MTAR) model that examines the relationship between stock markets for each of the five BRICS countries - Brazil, Russia, India, China and South Africa - and changes in their economic, financial and political country risk ratings in response to positive and negative shocks. The findings suggest that the long-run and short-run relationships between the stock market and the three risk ratings variables of each country respond asymmetrically to shocks for all of the five BRICS, but at different speeds and depending on the direction of the shock, underpinning the differences in profit opportunities among these countries. The adjustment is faster for the individual BRICS following a positive shock (than a negative shock), except for Russia. Despite their grouping, the stock markets of the five BRICS countries are dissimilar and can add to diversification benefits in portfolios.
KW - Asymmetry
KW - Convergence
KW - Country risk ratings
KW - Multivariate MTAR model
UR - http://www.scopus.com/inward/record.url?scp=84884927888&partnerID=8YFLogxK
UR - http://www.scopus.com/inward/citedby.url?scp=84884927888&partnerID=8YFLogxK
U2 - 10.1016/j.intfin.2013.07.013
DO - 10.1016/j.intfin.2013.07.013
M3 - Article
AN - SCOPUS:84884927888
SN - 1042-4431
VL - 27
SP - 99
EP - 112
JO - Journal of International Financial Markets, Institutions and Money
JF - Journal of International Financial Markets, Institutions and Money
IS - 1
ER -