Abstract:

Financial liberalization policies that were put into practice in the 1990s led to the renouncement of many practices which prevented capital mobility. In this respect, financial transactions were carried beyond the national money and capital markets, and an increase in the integration level of countries was observed. However, this increase in the level of integration led a problem that could occur in a country to reflect on other countries; and thus, similar movements were observed particularly in the stock markets of the emerging market economies. This study examines whether there has been a simultaneous movements between the stock indexes of Brazil, Russia, India, China and South Africa, which are known as BRICS countries, and Turkey. To this end, using the monthly MSCI emerging market index for these countries for the 2000-2016 period, an econometric analysis was conducted with the Carrion-i-Silvestre (2009) multiple structural breaks unit root test and Maki (2012) multiple structural breaks co-integration tests. The analyses revealed that the stock markets of the BRICS countries except for Brazil and the stock market of Turkey act together in the long term. The long-term coefficient estimation results of FMOLS and DOLS models indicated that there has been a long-term positive relationship between the stock indexes of Turkey and Russia, India, China, and South Africa at 99% significance level. Based on this result, it can be stated that it may not be possible to make risk diversification between the stock markets of these countries in the long term.

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