Volatility Spillover Effects on the Gold and Stock Markets of the BRIC Countries

Abstract

This study investigates gold and stock market correlations and volatility spillovers in BRIC countries during January 2015-November 2022, encompassing both the pre- and post-pandemic periods. Univariate and BEKK DCC-GARCH (1, 1) specifications and CoVaR analysis were employed. The findings indicate stationary volatility transmission not only within individual markets, but also across stock and gold markets in BRICs, advocating for diversified cross-market portfolios to mitigate risks. Notably, China shows no volatility spillovers from gold to stock market, whereas Russia exhibits singular volatility from gold to stock. This study highlights potential directional speculation, especially the COVID-19's impact on uneven economic growth in Brazil and India. This stresses the importance of adapting investment portfolios to varying market impacts and rational capital allocation for desired returns and risk management. Governments are urged to develop diversified economies and flexible market structures to navigate global economic homogeneity and to enhance market responsiveness and resilience.