IS THERE DIVERSIFICATION BENEFIT BETWEEN EMERGING AND DEVELOPED STOCK MARKET: EVIDENCE FROM THE BRIC AND US STOCK MARKET

This paper seeks to investigate the linkage and co-movement relationships between the stock markets of US and BRIC, and determine the degree of diversification benefits among them within the sample period from January 2001 to September 2017. The entire sample period is divided into three phases: pre-crisis, during crisis and post-crisis in order to be more comparative. The empirical results show that there is a strong linkage and co-movement relationship between BRIC and US stock markets, especially after 2007 financial crisis. Also, the upward long run conditional correlations demonstrate that the diversification benefits are weakened substantially. However, there is not any evidence showing the existence of co-integration between BRIC and US market for all three phases, except for the stock market of China during the crisis. Moreover, most of the BRIC stock markets are appeared to have no short term causality to US market.