The integration and efficiency of BRICS and Pakistan stock markets: An analysis using asymmetric cointegration and MF-DFA approaches

Authors

Rukhsana Bibi, National University of Modern Languages, IslamabadFollow
Kalsoom Akhtar, Institute of Business, Management And Administrative Sciences, The Islamia University Of BahawalpurFollow
Naveed Raza, Comsats University, IslamabadFollow

Abstract

This study examines the asymmetric cointegration and efficiency between Pakistan and BRICS equity markets using monthly data from October 1997 to September 2018. The results reveal that the Brazilian stock market is the most efficient during the global financial crisis. Threshold and momentum threshold autoregressive models (TAR and M.TAR) confirm the presence of a long-run relationship between BRICS and Pakistan stock markets, where the speed of negative shocks is higher and significant for Pakistan Russian, Pakistan South Africa stock market pair. This infers quick adjustment of stock prices to negative shocks (bad news) as compared to positive shocks (good news). The speed of adjustment of positive shocks for Pakistan China is higher. The results of asymmetric error correction model (AECM) show results of unidirectional causality between Pakistan China and Pakistan Brazil stock market pairs, while bidirectional causality runs from Pakistan Russia, Pakistan India, and Pakistan South Africa stock market pairs. Thus the Pakistan stock market has short-run and long-run relationships with most other stock markets. Multi-fractal detrended fluctuation analysis supports long run efficiency of Brazilian markets during the global financial crisis. It suggests that investors pay keen attention to the Pakistan stock market when investing in BRICS stock market.

Keywords

Asymmetric cointegration, MF-DFA, TAR and M.TAR, VECM, BRICS-Pakistan

DOI

https://doi.org/10.54784/1990-6587.1402

Journal of Economic Literature Subject Codes

G11, G15, F3, F65

Creative Commons License

This work is licensed under a Creative Commons Attribution 4.0 International License.

Recommended Citation

Bibi, R., Akhtar, K., & Raza, N. (2021). The integration and efficiency of BRICS and Pakistan stock markets: An analysis using asymmetric cointegration and MF-DFA approaches. Business Review, 16(1), 30-54. Retrieved from https://doi.org/10.54784/1990-6587.1402