EXPLORING THE STOCK MARKET VOLATILITY WITH BRIC COUNTRIES - AN EMPIRICAL INVESTIGATION

P. Hemavathy; S. Gurusamy

P. Hemavathy UGC-SRF, Department of Commerce, University of Madras, Chennai (Tamil Nadu)
S. Gurusamy Professor and Head, Department of Commerce, University of Madras, Chennai (Tamil Nadu)

Keywords: Generalized Autoregressive Conditional Heterokadascity, Stock Market, Volatility, Equity investors,, Credit rating agencies.

Abstract

Stock market is widely considered as a major indicator to imitate investor's outlook of futuristic economic
conditions. Investors in the BRIC countries have found out the hard-hitting line of attack that economic
development may not convert into stock market gains, and numerous analysts criticize problems with
corporate governance in Russian and Chinese markets. Volatility in equity market has happened to be
an issue of reciprocated concern for investors, regulators and brokers. It is mainly understood that the
stock price volatility is originated exclusively by the haphazard influx of new information connecting to
the expected returns from the stock. The stock markets functioning in BRIC countries have had its
reasonable share in the global financial crisis provoked by unnecessary speculation resulting in extreme
volatility. Indubitably, the investor's buoyancy has been eroded by excessive volatility of Stock Markets
in BRIC nations. The volatile stock market is a severe concern for policy makers since the stock market
fluxes creates improbability and thus unfavorably has an effect on economic growth. This study aims to
develop and examine the conditional volatility models in an attempt to confine the prominent features
of volatility in stock markets in BRIC countries. This empirical study is focused on BRIC emerging markets.
The study is based on secondary data acquired from Bloomberg database. The researcher have collected
daily closing stock prices from its respective exchange ie, (IBOVESPA) for Brazil, (RTSI) for Russia, NSE
(S&P CNX NIFTY) for India, (CSI300) for China. The researcher undertakes the popular econometric
technique such as GARCH model to study the behavior of volatility of Stock markets in BRIC Countries.
Results reveal that China reflects high degree of volatility of series returns among the BRIC countries.
This long-lasting volatility in the stock market has been disappointing issue for the retail investors to
invest in equity markets and boosted the obsession towards bullion industry in china. The researcher
concludes that higher volatility is both gesture and a vehicle of uncertainty. Credit rating agencies act
as driver of the stock market volatility. Credit rating agencies play an significant part in providing one
source of information that aids accuracy and market capability, thereby plummeting the imbalance of
information among the stock market investors.