GRAPHICAL AND STATISTICAL ANALYSIS TO DETERMINE THE DEGREE OF US FINANCIAL CONTAGION ON THE BRICS ECONOMY

Avnish Grover

Vol. 2, Jan-Dec 2016

Page Number: 396-429

Abstract:

Financial contagion is the harmful effect caused by one economy on the other. In today’s global market there is bound to exist some level of dependence of markets, but is that due to contagion or interdependence? In this paper, we analyze the stock indices data of the BRICS economies vs. the US index during the period 2008 and 2009 as the period of the 2008 financial crises as well as a period of tranquility during 2013 and 2014. Our aim is to find out the effect of contagion in these five emerging economies as well as the degree of contagion effect caused by financial movements in the US economy. We shall also try to prove whether the contagion effect is omnipresent or is stronger during times of crisis. This can be seen by analyzing markets that are dependent on each other even during tranquil times. Graphical Analysis, followed by Statistical Evaluation using SPSS has been done on the average monthly values of the major stock indices of each country. The NASDAQ (USA),BOVESPA (Brazil), MICEX (Russia), CNX Nifty (India), SSE Composite index (China) and The FTSE/JSE(South Africa) data for1st Jan 2008 to 31st Dec 2009 and 1st Jan 2013 to 31st Dec 2014 has been collected and analyzed. Linear Regression and correlation tests have been computed for the select stock market indices. Statistical Significance of the correlation has been tested by applying correlation t-test. The results of these studies support the view that there is a significant contagion effect of the US market on the BRICS international financial markets rolex replica

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