DOI: 10.3897/brics-econ.5.e122586

Authors: Kago Matlhaku

Abstract: This study examines the effects of financial development on the stock market comovement of Brazil, Russia, India, China and South Africa (BRICS) on the one hand and the US Dow Jones on the other. Its main goal is to find out if trust has a mediating effect on financial development using data from the World Bank and the World Value Survey (WVS). Panel data analysis along with ARDL methods helped the authors obtain robust results. It was found that financial development plays a significant role in determining stock market comovement among the countries in question and that trust also has a moderating impact. The analysis was extended to the institutional and market factors of financial development. The paper introduces trust as a mediating variable that positively affects financial development, which in turn promotes stock market integration and comovement. Its results imply that investors should consider financial development and trust levels of a country when considering portfolio allocation for global diversification purposes, especially in emerging markets. Countries with insufficient trust levels, like Brazil, could benefit from improving their trust score through enhancing financial development and stability.

HTML

XML

PDF

DOI: 10.3897/brics-econ.5.e121212

Authors: Ilya Gurov

Abstract: The study aims to identify the impact of digitalization on predictability in the BRICS countries’ stock markets. It is based on an analysis of the dynamics of stock markets volatility during the 1990-2023 period. The paper seeks to prove that the standard deviation of stock returns is determined by the volume of incoming new information, and higher volatility of returns indicates lower predictability. Digitalization may cause a reduction in uncertainty as it uses more data, improves their quality and develops data analysis methods. On the other hand, digitalization may lead to increased uncertainty due to the emergence and development of new industries, in which it is more difficult to predict cash flows in comparison with traditional industries because of increased complexity of supply chains and technologies. Based on quantitative analysis, it has been revealed that digitalization has led to a statistically significant decrease in the volatility of stock markets in the BRICS countries. In 2015-2023, relative to the period of the 1990s-2006, volatility in Russia decreased by 1 percentage point, in India by 0.4–0.5 percentage points, in China by 0.8 percentage points, in the UAE (Dubai) by 0.5-0.7 percentage points. Statistically insignificant decreases in volatility were observed in Brazil and South Africa. In the developed capital markets, the decrease in volatility between these two periods was also statistically insignificant, amounting to less than 0.1 percentage points. These findings may indicate that the processes of digitalization in the BRICS countries contributed to an accelerated increase in predictability thanks to an increase in the volume and quality of information and the emergence of new methods of analysis. At the same time, part of the decrease in volatility may be explained by further development and improved efficiency of capital markets. The joint influence of these effects on the complexity of forecasting turned out to be more significant than the impact of innovative technologies and new industries.

HTML

XML

PDF