A Time-Varying Copula Approach to Investigate the Dependence Structures of BRICS Stock Markets Before and After COVID-19

ABSTRACT

In this study, changes in the dependence structures of BRICS countries’ stock markets before and after the World Health Organization’s Covid-19 emergency declaration were examined using the time-varying (TV) copula method. The return series of the stock markets were divided into two periods, namely before COVID-19 (BC) and after COVID-19 (AC). The novel time-varying flexy copula (TVFC) proposed in the study provides a more flexible structure and produces better results than the TV single copula and the TV optimal copula in comparative analyses. In addition, risk spillovers between market indices were explored using the CoVaR-Copula method. According to the results, the interdependence coefficients of all countries were higher in the AC period than in the BC period with the exception of the China – South Africa pair. Moreover, the dependence coefficient of India with other BRICS countries was quite high compared to the other pairs. Based on the risk spillover results, it was concluded that the Chinese stock market index was the index least affected by the other BRICS countries in the AC period compared to the BC period.

KEYWORDS:

• BRICS
• copula
• COVID-19
• stock markets
• time-varying copula

JEL:

• C18
• C58
• G11
• G15
• G32

Acknowledgments

We would like to express our sincere thanks to the editors and anonymous reviewers for their constructive comments and suggestions, which have helped us to produce a significantly improved paper.

Data Availability Statement

The data that support the findings of this study were derived from the website investing.com.

Disclosure Statement

No potential conflict of interest was reported by the author(s).

Supplementary Material

Supplemental data for this article can be accessed online at https://doi.org/10.1080/1540496X.2022.2136942.