nep-cis New Economics Papers
on Confederation of Independent States
Issue of 2013‒02‒03
two papers chosen by
Alexander Harin
Modern University for the Humanities

  1. Crude Oil Prices and Liquidity, the BRIC and G3 countries By Ratti, Ronald A; Vespignani, Joaquin L.
  2. Predicting BRICS Stock Returns Using ARFIMA Models By Goodness C. Aye; Mehmet Balcilar; Rangan Gupta; Nicholas Kilimani; Amandine Nakumuryango; Siobhan Redford

  1. By: Ratti, Ronald A; Vespignani, Joaquin L.
    Abstract: Unanticipated increases in the BRIC countries’ liquidity lead to significant and persistent increases in real oil prices, global oil production and global real aggregate demand. Unanticipated shocks to the liquidity of developed countries over 1997:01-2011:12 do not. The relative contribution to real oil price of liquidity in BRIC countries to liquidity in developed countries is much greater since 2005 than before 2005. China and India drive the results for the effect of BRIC countries’ liquidity on real oil price and global oil production. China and India and Brazil and Russia reinforce one another on the effect of liquidity on global real aggregate demand. Due to the difference between countries as commodity importers/exporters, the liquidity of Brazil and Russia increases significantly with a rise in real oil price and that of China and India decreases significantly with a rise in real oil price. It is shown that the strong rebound in oil price during 2009 is mostly due to strong effects of shocks to liquidity in the BRIC countries. The analysis helps in assessing the importance of the BRIC economies in the upsurge of the real price of crude oil.
    Keywords: Oil Price; BRIC countries; China and India; Global liquidity
    JEL: E51 E31 G15 F01 Q43
    Date: 2012–11–01
  2. By: Goodness C. Aye (Department of Economics, University of Pretoria); Mehmet Balcilar (Department of Economics, Eastern Mediterranean University, Famagusta, North Cyprus,via Mersin 10, Turkey); Rangan Gupta (Department of Economics, University of Pretoria); Nicholas Kilimani (Department of Economics, University of Pretoria); Amandine Nakumuryango (Department of Economics, University of Pretoria); Siobhan Redford (Department of Economics, University of Pretoria)
    Abstract: This paper examines the existence of long memory in daily stock market returns from Brazil, Russia, India, China, and South Africa (BRICS) countries and also attempts to shed light on the efficacy of Autoregressive Fractionally Integrated Moving Average (ARFIMA) models in predicting stock returns. We present evidence which suggests that ARFIMA models estimated using a variety of estimation procedures yield better forecasting results than the non-ARFIMA (AR, MA, ARMA and GARCH) models with regard to prediction of stock returns. These findings hold consistently the different countries whose economies differ in size, nature and sophistication.
    Keywords: Fractional integration, long-memory, stock returns, long-horizon prediction, ARFIMA, BRICS
    JEL: C15 C22 C53
    Date: 2012–12

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