Financial integration and price discovery: evidence from FX & stock markets in the BRICs

Bellotti, Xijuan and Williams, Jonathan (2010) Financial integration and price discovery: evidence from FX & stock markets in the BRICs. International Review of Economics and Finance . ISSN 1059-0560 (Submitted (DO NOT USE - ineligible for repository))


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An asymmetric multivariate GARCH model with time varying variance-covariance structure is employed to jointly estimate conditional price discovery and volatility transmission processes across FX, domestic and international stockmarket price returns in the BRIC countries. The results indicate the following features: the role of US macroeconomic fundamentals in determining asset price returns in the BRICs; the time-varying nature of volatility dynamics; the variance of FX returns is lower than domestic stockmarket variance; conditional correlations between asset markets tend to be relatively small in magnitude; volatility is responsive to episodes of financial crisis and changes in exchange rate regime. The data suggest financial integration between BRIC markets and international markets is incomplete, with the pace of integration heterogeneous across the BRICs. We expect policymakers will continue to open domestic markets in an attempt to realise the expected benefits of financial integration.

Item Type:Article
Research Areas:A. > Business School > Economics
A. > Business School > Accounting and Finance
ID Code:4066
Deposited On:16 Feb 2010 07:47
Last Modified:18 Jul 2014 17:14

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