From pandemic to war: dynamics of volatility spillover between BRICS exchange and stock markets

Abstract

Purpose To estimate the volatility of exchange and stock markets and examine its spillover within and across the member countries of BRICS during COVID-19 and the conflict between Russia and Ukraine.Design/methodology/approach The study utilizes the “dynamic conditional correlation-generalized autoregressive conditional heteroskedasticity (DCC-GARCH)” approach of Gabauer (2020). The volatility of the markets is calculated following the approach of Parkinson (1980). The sample dataset comprises the daily volatility of the stock and exchange markets for 35 months, from November 2019 to September 2022.FindingsThe study confirms the existence of contagion effects among member countries. Volatility spillover between exchange and stock markets is low within the country but substantial across borders. Russian contribution increased significantly during the conflict with Ukraine, and other countries also witnessed a surge in the spillover index during the pandemic and war.Research limitations/implications It adds to the body of literature by emphasizing the necessity of comprehending the economies' behavior and interdependence. Offers insightful information to decision-makers who must be more watchful regarding the financial crisis and its regional spillover.Originality/valueThe study is the first to explore the contagion of volatility among the BRICS countries during the two biggest crisis periods of the decade.