BRICS Stock Markets Performances During COVID-19: Comparison with Other Economic Crises

Abstract

Stock markets serve as a weatherglass for an economy, industries and investors. Therefore, its continuous assessment in terms of risk and returns is pertinent. Markets behave differently in crises. Risk modelling is very important in coping with similar situations in the future. COVID-19 was a unique experience for the world, an assessment of which shall be a valuable addition to the literature. Brazil, Russia, India, China, South Africa, Iran, Egypt, Ethiopia and the United Arab Emirates, now considered one of the most powerful blocs, makes it a pertinent region to study. The study is directed to assess the downside stock market risk of the Brazil, Russia, India, China, South Africa, Iran, Egypt, Ethiopia and the United Arab Emirates (BRICS) during COVID-19 and compare it with other economic crises. The study investigates the association between the stock markets and the BRICS nations. We have considered the stock market indices of Brazil, Russia, India, China and South Africa. Data were also collected from the official websites of the respective stock indices of the countries for the period 1990–2021. Help has also been taken from Yahoo Finance. Then, four periods are identified as high volatility periods namely, the Asian Financial Crisis, the Internet Bubble Bursting, Global Financial Crisis and COVID-19. The downside risk is estimated using Value-at-Risk models. As per the results, the stock markets of India, Brazil and South Africa suffered the worst crisis during COVID-19. China has shocked the world by recovering very quickly compared to the rest of the world. Additionally, it has been observed that there is an increased association between different markets depending on the severity of the crisis. This is the first study focused on the downside potential of the markets, specifically of the BRICS nations. Thus, this will definitely help the BRICS as a whole to rethink their strategies together.