A Study of Causality and Co- Integration Effect Among the BRICS Countries Stock Exchanges - A Relationship Study

Development of financial system of one of the important determinants of global integration. Indian capital markets integration and co-movement with other International markets has grown rapidly. This paper deals with Stock market returns by five emerging international countries in the world which are popularly called BRICS countries i.e. Brazil, Russia, India, China, and South Africa. The authors tries to find out the linkages and relationship between the returns of these BRICS Stock Exchanges and to examine the effect of changes in the stock index of one country affects the stock index of other country or not. The monthly Index returns of all the five nations are taken from 2002 to 2013. We will try to test the long term relationship using Johansen Co-integration test to show long run association between the Stock Exchange Index returns. The analysis also provides the evidences of cause and effect relationship between the Nifty Index and BRICS Stock Exchanges Index. For that we apply Augmented Dickey fuller-test and Granger Causality test. The findings have important implications for investment and speculative decisions