Does Geopolitical Risk Drive Equity Price Returns of BRIC Economies? Evidence from Quantile on Quantile Estimations

Abstract

This research aims to study the effects of geopolitical shocks on the equity market returns of BRIC economies. Quantile on quantile regression (QQR) a non-parametric technique was used to capture the relationship between the said variables. The results confirmed a heterogeneous response of BRIC equity returns to their own country geopolitical risk. Brazilian and Russian funds were found to be more respon- sive to the geopolitical shocks, whereas, Indian and Chinese funds have shown resilience to the geopolitical uncertainties. The policy recommendations based on the findings are also discussed in the study.