Abstract
The effects of the Russia-Ukraine crisis on the stock market volatilities of BRICS countries (Brazil, Russia, India, China, and South Africa) are examined in this paper. The research draws on data from the closing prices of countries’ leading stock market indexes from February 1, 2020, up to July 26, 2024. The well-known GARCH (1,1) model supports the study to capture volatility persistence within a geopolitical context defined by its increasing uncertainty driven by the war between Russia and Ukraine. The core research findings show increased volatility in the Russian MOEX index at the early stages of the war, suggesting high levels of short-term volatility arising from geopolitical events in which Russia is directly involved. The shocks for the Russian market are short-lived, with similar results revealed for the rest of the countries that showed relatively stable behaviour, indicating a fast reaction to the geopolitical shock emerging from the Russian and Ukrainian war. The findings offer insights into the countries’ ability to withstand geopolitical changes, which could be explained by the potential diversification and growing vitality of the BRICS block. Among the BRICS countries, the Brazilian index IBOVESPA was identified as the most stable market, suggesting that aftermarket shocks make it relatively easy to return to its stability levels. The results offer interesting insights into the impact of geopolitical risks and the vulnerability exhibited by some emerging economies, providing evidence on how the BRICS countries differ in their reaction to the Russian-Ukrainian war and underlining the necessity of economic diversification and the importance of analysing countries’ geopolitical orientation to minimise the adverse impact of geopolitical risk on stock market fluctuations within a changing geofinance context.
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Recommended Citation
Sharma, Akshay
(2024)
"Geopolitical Risk and BRICS Volatilities,"
Critical Letters in Economics & Finance:
Vol. 2:
Iss.
1, Article 1.
Available at:
https://arrow.tudublin.ie/clef/vol2/iss1/1