Volatility In Capital Markets: A Comparison Between Brics and G7 Countries In The Context Of The Covid-19 Pandemic
DOI:
https://doi.org/10.5380/rcc.18.101963Keywords:
Uncertainty, Volatility, covid-19Abstract
This article compares the impacts of uncertainty caused by the covid-19 pandemic on the volatility of financial markets in two groups of countries: emerging markets (BRICS) and developed markets (G7). An uncertainty index associated with infectious diseases (EMVID) was used to explain variations in volatility. The results indicate a statistically significant association between increases in market risk and pandemic-related uncertainty. BRICS countries showed, on average, higher levels of volatility, although the differences were not statistically significant. There is heterogeneity among BRICS countries, particularly China, which exhibited the lowest levels of volatility. The results suggest that country-level analyses are more informative than analyses aggregated at the block level. The main contributions of the study are: (i) theoretical, by demonstrating how global health crises affect financial market volatility; (ii) empirical, by showing that average volatility between the G7 and BRICS does not differ statistically in the model, reinforcing the need for individual analyses; and (iii) methodological, by applying the EMVID index as a proxy for uncertainty associated with infectious diseases.
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