The Study Of Co-movement Among BRICS Stock Markets

In the 21st century, the pattern of world political economic and financial have undergone great changes. China firmly grasp the international environment of peace and development, relying on the country’s reform and opening up policy she made great achievements in the world’s economy and attracted worldwide attention, at the same time China fulfill the political and economic responsibility as a huge and powerful country has to, contribute a lot to the development of the world’s economy. 2008, the US subprime mortgage crisis triggered a global financial crisis, such as a atsunami overturn the global economy, the Western developed economies suffered a heavy blow and the world economy as a whole fall into recession, but as representatives of the emerging economies, the BRICS maintained a strong momentum of growth when facing the financial crisis,and BRICS become an important driving force to pull the global economy out of recession and back to economic recovery.From the "BRIC" economy concept proposed in 2001 to South Africa joined BRICS in 2010, and to the establishment of BRICS New Development Bank and the BRIC countries Contingency Reserves, the history of the development of BRICS demonstrates BRICS countries as an independent political force in addressing international affairs and the internal mechanisms of increasingly closer cooperation in the future. In particular, the establishment of development banks and contingency reserves mean BRICS’deeper financial cooperation.Stock market conditions is the thermometer of a country’s economy, it can directly reflect a country’s economic situation. It is based on the intricately connected global economy and BRICS’developing situation, the paper hopes to analyse the co-movement of the BRICS’stock markets in order to prevent or reduce the impact of a huge regional or worldwide economic crisis.In this paper,based on the stock index data of BRICS countries and according to europe debt crisis time-point to make analysis, the first stage is from August 9,2007 to February 12,2012, the second stage is from February 13,2012 to June 8,2015. This paper also analyze the co-movement between China、America and England.By using stationary test, co-integration test, vector autoregression model (VAR),error correction model (ECM), pulse analysis and variance decomposition model, draw the following conclusions:1, In the first stage from August 9,2007 to February 12,2012, Shanghai and Shenzhen 300 Index, India SENSEX30 index, Brazil IBOVESPA index showed cointegration relationship with the same trend of rise and fall. Vector autoregression VAR model, Granger causality model, impulse response function shows that there is a stronger linkage between Brazil and China’s stock market.2, In the second stage of the period from 13 February 2012 to 8 June 2015, when the situation of world economy is stable and peaceful, vector autoregression VAR model, Granger causality model, impulse response function of the stock market show that there is no clear relations between BRICS.Economic conditions, national conditions, openness, cultural, political and other reasons caused by the differences between countries and different economic ties are the foundation of the stock market linkage.Strength of economic’s association,trade and direct investment can affect the linkage of capital markets between countries.In the first stage,the economic developing model and history of China and Brazil share a lot of sameness, a huge economy and trade relationship between China and Brasil makes the co-movement between China and Brasil stronger than the other BRICS countries,this is complied with the analysis. When the subprime crisis and the debt crisis happened, the linkage between various countries became stronger, spillover of China’s financial markets is enhanced and become more sensitive to foreign stock markets, indicating that China’s stock market affected by the other BRIC countries.The second stage, diversified investment on of the BRICS stock markets maybe more prefered, and the weaker the correlation between the stock markets, the possibilities of diversified investment to reduce the risk is greater.