MASTER OF BUSINESS ADMINISTRATION OF BENGALURU CENTRAL UNIVERSITY

MODELING DYNAMIC VOLATILITY SPILLOVERS FROM THE U.S.

TO THE BRIC COUNTRIES STOCK MARKETS DURING THE
SUBPRIME CRISIS

Project Report submitted in partial fulfillment of the requirements for the

award of the Degree of MBA

Kanchana.Baburao

MB183641
Under the guidance of

S.SANTHANAM

M P BIRLA INSTITUTE OF MANAGEMENT

Associated Bhartiya Vidya Bhavan

No.43,Race Cource road,Bangaluru-560001,(2018-2020)

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 CHAPTERS PG.NO
Chapter 1 – Introduction 8-12
1.1 Introduction to the topic 1
1.2 Statement of the problem 11
1.3 Need and Relevance of the study 12

Chapter 2 – Methodology 13-14

2.1 Objectives of the study 11
2.2 Scope of the study 11
2.3 Data collection 14
2.4 Limitations of the study 14
Chapter 3- SWOC of Research 15-16
3.1 Strengths 15
3.2 Weaknesses 15
3.3 Opportunities 15
3.4 Challenges 16
Chapter 4 – Outcomes of the study (Analysis) 17-30
Outcomes of the study 17
Chapter 5 – Experiences, Learning’s and Conclusion 31-

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5.1 Experiences and learning
32
5.2 Conclusion
33
5.3 Suggestions
35
5.4 Summary of the findings

Bibliography 35

Annexure
36-40
 Plagiarism report
 Work done dairy

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 CHAPTER - 1

1. INTRODUCTION

BRIC is an acronym for the joint economies of Brazil ,Russia , India and china. Their economies
are collectively referred to as the BRIC countries, the BRIC economies or the big four. Today,
tcontris accounts for about 25 % of the world's land and over 40 % of its population. Volatility in
stock markets, even in other markets such as commodity markets, and currency markets can not
be described in a single statement. .it is something special for different investors. but in terms of
layperson, risk can be described as fluctuations in asset prices resulting from the indecisive
nature of investors. indecisive terms were used as uncertainty causes large variations in asset
prices in a given time frame. Basically, companies are willing to canter any strong and even
moderate risk for some uncertainty because with big swings in an asset price, investors may reap
a good portion of gain. On the other side, investors who are extremely risk-averse, like a retired
person, stay away from ups and downs on the equity market and participate in some debt items.

Growing competition and international ties between countries are making these countries ' stock
markets interlinked, thus raising the pre-movement between market measures. The activities took
place in one country's market are transmitted to some other countries ' markets. The WTO (word
trade orgazization), the IMF and the word bank have played a big role in the development and
growth of relations with other countries both in the financial transfers from country to country.
Companies and corporations in one nation are currently exposed to income and expenses of other
companies in other countries. These connections also made the counties more responsive to the
events taking place not only for their own markets, but also for other economies. Besides the
fudamental things, the listing of dotic investments on foregn student grants and the open up of
the money markets are more motivated by investors ' herding behavior of the investors.

The word BRIC is a group of Brazil, Russia, India and China, the most ambitious developed
markets. The BRIC countries may account for more than half the size of the G6 nations,
analyzed and expected by 2025. The BRIC countries should qualify for more than half of the G6
countries. The BIRC countries ' contribution to GDP may increase significantly, and the
increasing middle-class population would serve as a buffer against the challenging

7
conditions.Several scholars highlighted the growing business relations between both the BRIC
countries and the rest of the country.

Researchers have promoted awareness of the contagion effect on developed market assets and
raised issues about decoupling theory. A significant number of studies have tracked the returns
and spillovers of uncertainty from one market to another. Nevertheless, the present study aims to
quantify the spillover of complex instability from the U.S. to the BRIC countries (Brazil, Russia,
India and China) during the subprime crisis. The research is not limited to volatility spillover
effects from in the U.S. to all other BRIC stock markets, yet a symmetric reaction of volatility to
down market outcomes also has been observed in the BRIC markets. The subprime crisis and, in
a general sense, the financial crisis in the U.S. has been caused by banks ' subprime financing
practices. The mortgage-backed securities produced as a result of subprime mortgages
compounded the problem as property prices began to fall, and the crisis began to threrof. The
timeframe considered for the study includes the period from 2007 to 2009 during which the
market recovery started, making the study a fist of its kind. Global investors, particularly fund
managers when investing in foreign markets, The interlinkages between countries or the
concened capital must be considered. Solnik, Boucrelle, and le Fur (1996) analyzed the
correlation between the international stock markets and the money markets. The researchers
found that the correlation here between industries held steady over time and as such, The
correlation increased in the situation of increased market uncertainty, thus having an effect at the
other business in the moment of systemic risk.

The current subprime crisis caused by the bursting bubble in the United States ' real estate sector
seemed to be the most devastating for financial houses, manufacturing land and stock markets
worldwide. In reality, this crisis has exposed the subtle vulnerabilities in the regulation of the
financial industry and challenged the validity of the global financial system. While there is an
obvious consensus on the impact of the latest US subprime crisis on systemic risk. And the
network of transition between the US and the various economic sectors between the US and
other markets are such empirical questions that have not been delth with comprehensively only
limited literature is available till today for instance Using the structural vector autoregressive
model angkinand et al (2009), for example, explores the spillover effects of U.S. returns and 20

8
international stock returns consisting of both established and emerging markets, are such
empirical issues that have not been answered by comprehensively limited studies.

There is waiting time in the business hour of the countries concerned. The time difference
between the United States and Brazil is only 1 hour relative to the other BRIC block countries,
so, Contemporary spillover effects of volatility also occur. In this analysis, we concentrate only
on the competitive effects of the U.S. market on the BRIC countries and have therefore relied
solely on the one-day lagged U.S. market effect. Due to the increased degree of economic
penetration throughout the world, the recession that began in the US has spread the domestic
market both directly and indirectly into other foreign markets. The indirect spillover occurred in
the sense that, although a country was not directly exposed to US markets but was connected to
countries that were more exposed to the US market, it also caused the crisis to spill over to that
country

1.1 IMPORTANT OF THE STUDY:

The study aims to evaluate the impact of the US on emerging nations ' stock markets. The
process of integration between financial markets has begun to increase since the era of financial
liberalization in the 1990s. The cycle of convergence between financial markets has begun to
increase, which means that co-movements between international markets are gradually
increasing. Nevertheless, since the phenomenon of the US financial crisis in 2007, investors
began to look for an alternative market to increase the benefit from asset diversification.
International investors began to study investment opportunities and future markets for global
asset diversification, and the BRICS became a major priority for them as they tried to merge
these emerging economies with developed ones. Therefore, the BRICS report will provide
valuable information for managing their investments and financial risks to international investors
and portfolio managers. My thesis also aims to respond to findings on the transition of volatility
from the United States to all five BRICS nations With the support of the Vector AutoRegressive-
Generalized AutoRegressive Conditional 7 System for Heteroskedasticity (VAR-GARCH), since
I found that most of the analysis focused exclusively on BRIC and South Africa.

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1.2STATEMENT OF THE PROBLEM

 Broker defaults
 Lag in securities admission
 Inadequate instruments
 Unofficial transation
 Payment crisis

 Broker defaults: Because of over-speculation in particular shares, broker

defaults occur. Such bad debts destabilize stock exchanges and lead to payment
crisis.

 Lag in securities admission: There is high delay in admitting securities for

trading .sometimes it goes beyond 60 or even 70 days.

 Inadequate instruments : equity.covertible debenture problems dominate

the markets. Very limited preference shares are almost non-existent, which is
preferred by shareholders seeking guaranteed returns.
 Unofficial transaction: In addition to the regular stock exchange, informal
markets exist. In these informal stock markets, trading takes place.

 Payment crisis : Market players indulge in excessive speculation and trading

to profit from the increase and decrease in prices .

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1.3 NEED AND RELEVANCE OF THE STUDY:

 To found evidence for both the short-term static and long term dynomic
incorpartion between the stock market.
 To understand in incorporation among the stock markets of BRIC
(Brazil,Russia,India & china)
 To study the presence of important changes in the time-varying linkages of the
BRIC stock markets with the US and european ones.
 Thise study have implications for policy markets in responding to increasing
financial interation across border.
 Need to improve the investment.

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 CHAPTER- 2

METHODOLOGY

2.1 OBJECTIVE OF THE STUDY

 To improve standard of living
 To ensure full employment
 To study the benefits of WTO & GATT on indian foreign trade
 Secure proper shere in the growth of international trade
 Analysis of their sectors namely agriculture textile & service

2.2 RESAERCH METHODOLOGY:

An Descriptive research has been adopted for the purpose of knowing the impact and
significance of various fundamentals.BRIC stock market subprime crisis.the descriptive
study.which is largely used to draw the inference about the possible relationship between
variables economic framework.

 Augmented dickey fuller test (ADF)

 Johansen Co-integration test,
 Descriptive statistics
 Unit root test

 Augmented Dickey fuller test:

An augmented dickey-fuller tests the null hypothesis that a unit root is present in a time series
sample.The alternative hypothesis is different depending on which version of the test is used,but
is usually stationarity trend stationarity.

 Johansen Cointegration

The method for assessing long-run relationships was developed by Johansen (1988)and
johasnen and Julius (1990).He applies the maximum likelihood procedure to determine the

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 presence of cointegrative vectors in a set of nonstationary time series.The null hypothesis is
that there is no cointegration among the series.There is no evidence of cointegration between
the US and china.There is also some cointegration between the US and BRIC indexes
together.

 Descriptive statistics:

A descriptive research has been adopted for the purpose of knowing the impact and
significance of BRIC stock market subprime crisis .The descriptive study ,which is largely
used to draw the inference about the possible relationship between variables.

 Unit root test:

In statistics , a root test unit tests whether a variable in the time series is non-stationary
and has a root unit. In general , the null hypothesis is defined as the presence of a unit
root and the alternative hypothesis is either stationary, trend stationary or explosive root
depending on the test used.

2.3 DATA COLLECTION:

Both primary and secondary data was collected and were utilized in order to address the research
objectives. primary data was collected by interaction with the employees of

2.4 LIMITATION OF THE STUDY:

The present study has consudered only an adverse event, that is, the US financial period future
research can be extended to cover the period after the us. Financial crisis,specifically to
understand the impact of a developed economy like the US on other emerging markets,either
directly or indirectly. Moreover the same study can beconducted with regard to other emeging
markets or frontier markets,and researchers can ascertain their response to volatility from a
developed economy.

 The study is to be done on the assumption that the respondents will give correct
responses.
 The s convenient sampling.
 The available information in the company.
 The BRIC countries stock markets during the subprime

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 CHAPETER - 3

SWOC OF RESEARCH

3.1 Strength
 To use resources
 Market opportunities
 Economic dovelopments
 Move towards a multipalar economic & political order
 Move towards making the global economic system more robust

3.2 Weakness
 Population problem
 Lack of infrastructure
 Decreasing GDP rate

3.3 Opportunities
 Inclusive growth
 To expand the market
 To achieve regional development
 BRCI economics could become a much larger force in the world
economy
 The BRIC real exchange rates could appreciate by up 300 % over the
next 50 year
 BRIC maintain policies and develop institutions that are supportive of
growth
3.4 Challenges
 Development of BRIC bank
 Reducing the rural /urban income gap
 Inadequate financial reforms

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  Managing supply chain

BRAZIL challenges
 Overburdened and ineffective judicial system.
 Industrial output is weak.

RUSSIA challenges

 Labor shortages and poorly developed infrastructure.

 Corruption.

INDIA challenges

 Improving basic educational achievement.

 Improving infrastructure and electrical capacity.
 Expanding technology industry & agriculture.

CHINA challenges

 Support to rural areas and less-developed regions.

 Bank of china sees inflation as a bigger risk.

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 CHAPTER- 4

OUTCOME OF THE STUDY/ANALYSIS

SENSEX

GRAPH NUMBER 4.1

GRAPH SHOWING SENSEX MOVEMENT FOR THE STUDY PERIOD

Adj Close
40,000

35,000

30,000

25,000

20,000

15,000

10,000

5,000

0
98 00 02 04 06 08 10 12 14 16 18

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 TABEL NUMBER 4.1

TABLE SHOWING DESCRIPTIVE STATISCIS

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Series: ADJ_CLOSE
Sample 1997M07 2019M04
40 Observations 262

Mean 14875.39
30 Median 14594.89
Maximum 39031.55
Minimum 2810.660
20 Std. Dev. 10326.89
Skewness 0.515021
Kurtosis 2.155131
10
Jarque-Bera 19.37480
Probability 0.000062
0
4000 8000 12000 16000 20000 24000 28000 32000 36000 40000

ANALYSIS: It is evident from the table 4.1 that mean return for the study period was
14875.39with SD of 10326.89. However, skewness for the study period was 0.515021 and
kurtosis value was 2.155131, Jarque-Bera statistics for the study was 19.37480 and data was not
normally distributed.

TABLE No. 4.2

TABLE SHOWING ADF TEST STATS (AT LEVEL)

t-Statistic Prob.*
Augmented Dickey-Fuller test statistic -2.258671 0.4546
Test critical values: 1% level -3.993608
5% level -3.427137
10% level -3.136859

ANALYSIS : the collected data has been tested by running ADF test in order to check the
stationarity.at this level we found a unit root in the data, when it was differenced the following is
the test result .

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 TABLE NUMBER 4.3

TABLE SHOWING ADF TEST STATS (AFTER FIRST DIFFERENCE)

t-Statistic Prob.*
Augmented Dickey-Fuller test statistic -16.38401 0.0000
Test critical values: -3.993746 -3.993608
-3.427203 -3.427137
-3.136898 -3.136859
ANALYSIS : it is the evident from the above table number 4.3 that the data was stationary as
the ADF stats is greater than the critical value and p value is less than 0.001.

CPI

GRAPH NUMBER 4.2

GRAPH SHOWING CPI MOVEMENT FOR THE STUDY PERIOD

CPI
20

16

12

0
98 00 02 04 06 08 10 12 14 16 18

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 GRAPH NUMBER 4.4

TABLE SHOWING DESCRIPTIVE STATISTICS

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Series: CPI
Sample 1997M07 2019M04
20
Observations 262

16 Mean 6.601913
Median 5.714381
Maximum 19.67213
12 Minimum 0.000000
Std. Dev. 3.379826
8 Skewness 0.978220
Kurtosis 4.017786

4 Jarque-Bera 53.09370
Probability 0.000000
0
0 2 4 6 8 10 12 14 16 18 20

ANALYSIS :It is evident from the table 4.4 that mean return for the study p was 6.601913,with
SD of 3.379826.however ,skewness for the study period was 0.978220 and kurtosis value was
4.017786, Jarque-Bera statisctics for the study was 53.09370 and data was not normally
distributed.

TABLE NUMBER 4.5

TABLE SHOWING ADF TEST STATS (AT LEVEL)

t-Statistic Prob.*
Augmented Dickey-Fuller test statistic -2.239917  0.4649
Test critical values: 1% level -3.995340
5% level -3.427975
10% level -3.137353
ANALYSIS: The collected data has been tested by running ADF test in test to check the
stationarity. At this level we found a unit root in the data, when it was differenced the following
is the test result .

TABLE NUMBER 4.2.6

TABLE SHOWING ADF TEST STATS (AFTER FIRST DIFFERENCE)

t-Statistic Prob.*
Augmented Dickey-Fuller test statistic -8.410933  0.0000
Test critical values: -3.995340 -3.995340

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 -3.427975 -3.427975
-3.137353 -3.137353

ANALYSIS : It is the evident from the above table number 4.2.6 that the data was stationary as
the ADF stats is greater than the critical value and p value is less than 0.001.

LAG SELECTION BETWEEN CPI AND SENSEX

 Lag LogL LR FPE AIC SC HQ

0 -3378.561 NA   1.25e+09  26.61859  26.64644  26.62979

1 -2446.788  1841.536  836965.8  19.31329  19.39685  19.34691
2 -2430.100   32.71896*  757395.6  19.21339   19.35265*   19.26941*
3 -2425.534  8.879561   754043.4*   19.20893*  19.40390  19.28737
4 -2423.356  4.201869  764962.6  19.22328  19.47395  19.32412
5 -2422.492  1.653664  784123.8  19.24797  19.55435  19.37122
6 -2420.920  2.983437  799314.2  19.26708  19.62917  19.41275
7 -2418.108  5.292167  806903.0  19.27644  19.69423  19.44451
8 -2416.460  3.075290  822089.4  19.29496  19.76846  19.48544

It is evident from the above table no that the VAR lag selection for CPI was 1 as per LR, FPE,
AIC and SC

JOHANSEN COINTEGRATION TEST – UNRESTRICTED COINTEGRATION RANK

TEST (TRACE STATISTICS)

Hypothesized Trace 0.05

No. of CE(s) Eigenvalue Statistic Critical Value Prob.**

None  0.031860  9.032464  15.49471  0.3624

At most 1  0.002628  0.678912  3.841466  0.4100
Unrestricted Cointegration Rank Test (Maximum Eigenvalue)

Hypothesized Max-Eigen 0.05

No. of CE(s) Eigenvalue Statistic Critical Value Prob.**

None  0.031860  8.353553  14.26460  0.3439

At most 1  0.002628  0.678912  3.841466  0.41

ANALYSIS: once we found the same order of integration, we ran Johansen cointegration test to
establish the relationship between two variables. It is evident from the above table No that the
trace statistics accepts the null hypothesis that there was no cointegrating vectors in the model.
However, in case of second hypothesis we found a cointegrating vector at 5% level. Similarly we

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have the same results for Maximum Eigen value statistics. We are accepting the null hypothesis
at the first phase and rejecting the null at the second stage.

Since we found a cointegrating vector VECM model has been run. The following is the test
results.

Included observations: 260 after adjustments

ADJ_CLOSE = C(1)*ADJ_CLOSE(-1) + C(2)*ADJ_CLOSE(-2) +
C(3)*CPI(
        -1) + C(4)*CPI(-2) + C(5)

Coefficient Std. Error t-Statistic Prob.  

C(1) 0.981771 0.062575 15.68945 0.0000

C(2) 0.023221 0.063127 0.367848 0.7133
C(3) -54.76467 56.83840 -0.963515 0.3362
C(4) 47.76175 56.79754 0.840912 0.4012
C(5) 110.8820 147.9706 0.749351 0.4543

R-squared 0.992311    Mean dependent var 14958.35

Adjusted R-squared 0.992191    S.D. dependent var 10322.92
S.E. of regression 912.2326    Akaike info criterion 16.48871
Sum squared resid 2.12E+08    Schwarz criterion 16.55719
Log likelihood -2138.532    Hannan-Quinn criter. 16.51624
F-statistic 8227.766    Durbin-Watson stat 2.011831
Prob(F-statistic) 0.000000

Association between the

dependent variable and the independent variable CPI. However, we could not establish the short

In order to investigate any joint impact of lags on the price movement we ran Wald stats. The
following is the test results.

Wald Test:
Equation: Untitled

Test Statistic Value Df Probability

F-statistic  0.482237 (3, 255)  0.6949

Chi-square  1.446711  3  0.6946

ANALYSIS: It is evident from the above table that there was no joint impact of lags on the price
moments of CPI.

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 IMPULSE RESPONSE FUNCTION CHINA
Response to Cholesky One S.D. Innovations ± 2 S.E.
Response of ADJ_CLOSE to ADJ_CLOSE Response of ADJ_CLOSE to CPI
1,200 1,200

800 800

400 400

0 0

-400 -400

-800 -800
1 2 3 4 5 6 7 8 9 10 1 2 3 4 5 6 7 8 9 10

Response of CPI to ADJ_CLOSE Response of CPI to CPI

1.6 1.6

1.2 1.2

0.8 0.8

0.4 0.4

0.0 0.0

-0.4 -0.4
1 2 3 4 5 6 7 8 9 10 1 2 3 4 5 6 7 8 9 10

ANLAYSIS: it is evident from the above graph that the shock on account of CPI was pushed
the price down for the first two months and later it started increasing. Indicating the shock is a
temporary phenomenon.

VARIANCE DECOMPOSITION FUNCTION

 Period S.E. ADJ_CLOSE CPI

 1  912.2326  100.0000  0.000000

 2  1280.872  99.83666  0.163340
 3  1567.121  99.68097  0.319032
 4  1810.734  99.56140  0.438602
 5  2027.224  99.47052  0.529483
 6  2224.553  99.39920  0.600799

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  7  2407.454  99.34110  0.658902
 8  2579.010  99.29218  0.707821
 9  2741.362  99.24991  0.750095
 10  2896.069  99.21264  0.787361
CHINA

GRAPH NUMBER 4.3

GRAPH SHOWING MOVEMENT FOR THE STUDY PERIOD

Adj Close
7,000

6,000

5,000

4,000

3,000

2,000

1,000

0
92 94 96 98 00 02 04 06 08 10 12 14 16 18

TABLE NUMBER 4.3

TABLE SHOWING DESCRIPTIVE STATISICS

40
Series: ADJ_CLOSE
35 Sample 1990M12 2019M04
Observations 341
30
Mean 1928.971
25 Median 1747.993
Maximum 5954.765
20 Minimum 113.9400
Std. Dev. 1064.899
15
Skewness 0.651397
Kurtosis 3.435064
10

Jarque-Bera 26.80480
5
Probability 0.000002
0
0 500 1000 1500 2000 2500 3000 3500 4000 4500 5000 5500 6000

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ANALYSIS :It is evident from the table 4.3 that mean return for the study period was
1928.971,with SD of 1064.899.however ,skewness for the study period was 0.651397 and
kurtosis value was 3.435064, Jarque-Bera statisctics for the study was 26.80480 and data was
not normally distributed.

TABLE NUMBER 4.3.1

TABLE SHOWING ADF TEST STATS(AT LEVEL)

t-Statistic   Prob.*

Augmented Dickey-Fuller test statistic -3.787281  0.0183

Test critical values: 1% level -3.985442
5% level -3.423176
10% level -3.134520
ANALYSIS :The collected data has been tested by running ADF test inorder to check the
stationarity.at this level we found a unit root in the data, when it was differenced the following is
the test result .

TABLE NUMBER 4.3.2

TABLE SHOWING ADF TEST STATS (AFTER FIRST DIFFERENCE)

t-Statistic   Prob.*

Augmented Dickey-Fuller test statistic -10.78012  0.0000

Test critical values: -3.985442 -3.985442
-3.423176 -3.423176
-3.134520 -3.134520

ANALYSIS : It is the evident from the above table number 4.3.1 that the data was stationary as
the ADF stats is greater than the critical value and p value is less than 0.001.

LAG SELECTION BETWEEN CHINA

24
  Lag LogL LR FPE AIC SC HQ

0 -3824.329 NA   32775826  22.98096  23.00383  22.99008

1 -2621.274  2384.433  24432.59  15.77943  15.84804  15.80679
2 -2609.177  23.83184  23272.85  15.73079  15.84515  15.77639
3 -2592.216  33.20952  21530.05  15.65295   15.81305*   15.71679*
4 -2590.608  3.128939  21841.91  15.66731  15.87316  15.74940
5 -2587.544  5.924668  21965.58  15.67294  15.92453  15.77326
6 -2582.578  9.544648  21839.17  15.66713  15.96447  15.78570
7 -2575.241  14.01222  21406.79  15.64710  15.99017  15.78390
8 -2569.024   11.79912*   21124.82*   15.63378*  16.02260  15.78882

JOHANSEN COINTEGRATION TEST – UNRESTRICTED COINTEGRATION RANK

TEST (TRACE STATISTICS)

Hypothesized Trace 0.05

No. of CE(s) Eigenvalue Statistic Critical Value Prob.**

None  0.046570  20.72643  15.49471  0.0074

At most 1  0.014631  4.893485  3.841466  0.0270
Unrestricted Cointegration Rank Test (Maximum Eigenvalue)

Hypothesized Max-Eigen 0.05

No. of CE(s) Eigenvalue Statistic Critical Value Prob.**

None 0.046570 15.83295 14.26460 0.0280

At most 1 0.014631 4.893485 3.841466 0.0270

ANALYSIS: once we found the same order of integration, we ran Johansen cointegration test to
establish the relationship between the two variables. It is evident from the above table No that
the trace statistics accepts the null hypothesis that there was no cointegrating vectors in the
model.

However, in case of second hypothesis we found a cointegrating vector at 5% level. Similarly we

have the same results for Maximum Eigen value statistics. We are accepting the null hypothesis
at the first phase and rejecting the null at the second stage.

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ADJ_CLOSE = C(1)*ADJ_CLOSE(-1) + C(2)*ADJ_CLOSE(-2) +
C(3) it is evident from the above
        *ADJ_CLOSE(-3) + C(4)*ADJ_CLOSE(-4) + table that there was a long-
C(5)*ADJ_CLOSE(-5) + term association between
        C(6)*ADJ_CLOSE(-6) + C(7)*ADJ_CLOSE(-7) + the dependent variable and
C(8)*ADJ_CLOSE(-8) 
the independent variable
        + C(9)*CPI(-1) + C(10)*CPI(-2) + C(11)*CPI(-3) +
C(12)*CPI(-4) + C(13) CPI. However, we could
        *CPI(-5) + C(14)*CPI(-6) + C(15)*CPI(-7) + C(16)*CPI(-8) not establish the short run
+ C(17) relationship between the
two variables.
Coefficient Std. Error t-Statistic Prob.  
In order to investigate any
C(1) 1.030399 0.055968 18.41051 0.0000
joint impact of lags on the
C(2) 0.091764 0.079809 1.149805 0.2511
C(3) -0.256903 0.079431 -3.234288 0.0013 price movement we ran
C(4) 0.225607 0.081043 2.783803 0.0057 Wald stats. The following
C(5) -0.030327 0.081040 -0.374222 0.7085 is the test results.
C(6) -0.207332 0.079561 -2.605949 0.0096
C(7) 0.214959 0.080259 2.678319 0.0078
C(8) -0.106809 0.056193 -1.900738 0.0582
C(9) Wald Test: 16.62245 1.399582 0.1626
23.26448
C(10) Equation:
-12.79001Untitled
25.06462 -0.510282 0.6102
C(11) -35.73919 25.00691 -1.429173 0.1539
C(12) Test Statistic 24.93377
28.09744 Value 1.126883 Df 0.2606
Probability
C(13) -20.62965 24.91510
F-statistic -0.827998
 2.002405 (9, 316)0.4083
 0.0386
C(14) 2.453630 24.69857
Chi-square 0.099343 9 0.9209
 18.02165  0.0349
C(15) 15.68926 24.49683 0.640461 0.5223
C(16) -4.085955 16.19165 -0.252350 0.8009 ANALYSIS: It is evident
C(17) 97.60460 30.67127 3.182281 0.0016 from the above table that

R-squared 0.963562    Mean dependent var 1972.247 there was no joint impact

Adjusted R-squared 0.961717    S.D. dependent var 1039.838 of lags on the price
S.E. of regression 203.4541    Akaike info criterion 13.51846 moments of Bitcoin.
Sum squared resid 13080373    Schwarz criterion 13.71287
Log likelihood -2233.824    Hannan-Quinn criter. 13.59598
F-statistic 522.2717    Durbin-Watson stat 1.995587
Prob(F-statistic) 0.000000

IMPULSE RESPONSE FUNCTION CHINA

26
 Response to Cholesky One S.D. Innovations ± 2 S.E.
Response of ADJ_CLOSE to ADJ_CLOSE Response of ADJ_CLOSE to CPI
300 300

200 200

100 100

0 0

-100 -100
1 2 3 4 5 6 7 8 9 10 1 2 3 4 5 6 7 8 9 10

Response of CPI to ADJ_CLOSE Response of CPI to CPI

1.6 1.6

1.2 1.2

0.8 0.8

0.4 0.4

0.0 0.0

-0.4 -0.4
1 2 3 4 5 6 7 8 9 10 1 2 3 4 5 6 7 8 9 10

ANALYSIS: it is evident from the above graph that the shock on account of CPI was pushed the
price down for the first two months and later it started increasing. Indicating the shock is a
temporary phenomenon.

VARIANCE DECOMPOSITION FUNCTION

 Period S.E. ADJ_CLOSE CPI

 1  203.4541  100.0000  0.000000

 2  291.9187  99.70659  0.293410
 3  374.4398  99.37265  0.627352
 4  429.2101  99.41695  0.583050
 5  487.4275  99.45482  0.545176
 6  542.7388  99.55981  0.440194
 7  585.3090  99.59307  0.406930
 8  628.2087  99.58405  0.415946
 9  663.7486  99.55408  0.445921
 10  697.7192  99.50875  0.491253
BOVESPA

27
 GRAPH NUMBER 4.4

GRAPH SHOWING MOVEMENT FOR THE STUDY PERIOD

Adj Close
100,000

80,000

60,000

40,000

20,000

0
94 96 98 00 02 04 06 08 10 12 14 16 18

TABEL NUMBER 4.4

TABLE SHOWING DESCRIPTIVE STATISCIS

28
Series: ADJ_CLOSE
24 Sample 1993M04 2019M04
Observations 313
20
Mean 35730.67
Median 36596.00
16
Maximum 97394.00
Minimum 24.10000
12 Std. Dev. 25827.70
Skewness 0.261423
8 Kurtosis 1.797994

4 Jarque-Bera 22.40801
Probability 0.000014
0
0 10000 20000 30000 40000 50000 60000 70000 80000 90000

ANALYSIS : It is evident from the table 4.4 that mean return for the study period was
35730.67 ,with SD of 25827.70 however ,skewness for the study period was 0.261423 and

28
kurtosis value was 1.797994, Jarque-Bera statisctics for the study was 22.40801 and data was
not normally distributed.

TABLE NUMBER 4.4.1

TABLE SHOWING ADF TEST STATS(AT LEVEL)

t-Statistic Prob.*

Augmented Dickey-Fuller test statistic -2.027610  0.5835

Test critical values: 1% level -3.987745
5% level -3.424294
10% level -3.135181

ANALYSIS :The collected data has been tested by running ADF test inorder to check the
stationarity.at this level we found a unit root in the data, when it was differenced the following is
the test result .

TABLE NUMBER 4.4.2

TABLE SHOWING ADF TEST STATS (AFTER FIRST DIFFERENCE)

t-Statistic Prob.*

Augmented Dickey-Fuller test statistic -15.76271  0.0000

Test critical values: -3.987841 -3.987745
-3.424340 -3.424294
-3.135208 -3.135181

ANALYSIS : It is the evident from the above table number 4.4.2 that the data was stationary as
the ADF stats is greater than the critical value and p value is less than 0.001.

29
 CHAPTER - 5

EXPERIENCES,LEARNINGS,COUNCLUSION, BIBLIOGRAPHY

5.1 EXPERINCES:

This was my firs research experience The ipt of the project was ” BRCI COUNTRIES STOCK
MARKETS DURING THE SUBPRIME CRISIS” The approch in thise study was mainly based
on interaction with the employees of the organization trough interview technique. This study
helped me to gain more knowledge about the various stock markets of BRIC countries. I took all
the historical data from the yahoo finance and other websites it helped me to analyse the various
countries data. The study on stock market helped me to know the how the stock market operates
in the various countries. I learned how to balance between my education and other circular
activities. This study also helped to analyse how the factors which influence the market constant
change. Through some experimentation I was able to figure out how the BRIC countries and
stock returns where related to each other. By analysing the study and experiment gained
knowledge and understanding the various stock market.

The aim of the project was “BRCI COUNTRIES STOCK MARKETS DURING THE SUBPRIME CRISIS
”The approch in thise study was mainly based on interaction with the employees of the
organization trough interview technique.The methodology was based on qualitative research
analysis.The objective of the study were to understand the effect of performance appraisal on
employee productivity,the current performance appraisal process in the organization and to
understand the satisfaction level of employees.

5.2 LEARNINGS:

By analysing the various stock market , We Understood that knowledge of multiple niches and
industries is always beneficial. This is historical era of business prosperity. First thing I have
learned and improved my knowledge about the stock market.

30
5.3 CONCLUSION

Over the past few years, flation in specific and cost of goods inflation in particular have been a
persistent problem in India. Price stability is crucial to the framework of sustainable growth and
factors that affect food inflation, so it is important to control it within reasonable limits for any
sound policy decision.

Economic policies need to be accompanied by statistical information and an appreciation of

economic theory. Social change from around the world on deflation must be taken. Making
economic policies on this is simply not easy, but international cooperation is necessary not only
to achieve solid, sustainable and balanced growth, but also to preserve adequate liquidity
throughout the market.

Finally, I would like to say that inflation plays a key role in weakening the economy. Inflation
can mainly be seen in food items that affect the nation's weaker sections of people. The world
economy government and stakeholders should think so much about how deflation can be
reduced. Nutrition is a universal human need. If inflation more in food papers, it will harm to the
country people. Inflation should not be there in food articles because nutrition is basic need for
all groups of the population. Fitness is a physical need that is normative. If economic growth in
food papers is increased, this will affect the citizens of the country. There should be no inflation
in food items because nutrition is a basic necessity for all income groups. In my specific review,
I also taken sources below, and I want to thank all the writers who enabled me to finish
comfortably. I would like to acknowledge the writers of the papers below who have given me the
idea of writing an article on inequality, to my knowledge I have discussed the items in this post.
It will only become spill-reference papers below those reference posts. The recent advances in
the research on the partnership among inflation and growth and the seemingly contrary evidence
offered to developing countries economies inspired this research. In this paper, the models of
non-integration and error detection used annual data to scientifically analyze long-run and short-
run dynamics of both the relation of deflation economic growth for India. The main goal was to
analyze if either, and if so, its nature, there is a relationship between financial inflation and
interest rates. The strange results found in this exercise are the negative relationships around
inflation and economic growth. Ultimately, these dramatic shifts get a major impact on the nature
of money supply, and therefore the nature of the impact of money supply on macroeconomic
variables can change significantly. There is therefore a want to examine how well the economic
and financial variables have been influenced by this changing landscape.

31
5.4 SUGGESTIONS
The main aim of the study was to investigate the effect of money supply on inflation. For any
country’s economy to experience growth, the money supply has to be efficient and important
institution in any economy. Since financial markets are also influenced by other macroeconomics
variables such as foreign exchange rate, interest rate, monetary policy, fiscal policy and
industrial production. The study also shows that there is a positive relation-ship between money
supply and inflation rate. This supports the study of that in-flation in India seems to find
explanation in money supply. As a result, the government of Nigeria should put in place serious
reforms that will ensure that more of the money in the circulation is in the productive sector.
From the study too, interest rates have an important impact on monetary expansion in the
economy. It is therefore rational to confirm the market forces of demand and supply. For
example, relatively easy monetary policy for the expansion of money supply aims in inducing
banks to reduce their lending rates in order to provide low cost of credit to private sector and thus
giving a real boost to economy and opposite government should use the level of inflation as an
operational guide in measuring the effectiveness of its monetary policy. Hence if these policy
measures for the money supply in the economy were to be applied, they may be helpful to
control of monetary expansion.

The national bank (Reserve bank of India or nay other national banks) ought to adjust to
monetary pattern and change its own arrangement instruments to adjust to advancement of
electronic cash. For example, monetary foundation and non-budgetary organizations should
connection to one another viably so as to control the electronic cash. What's more, culminating
the applicable laws is additionally essential. To begin with, the national bank ought to set up an
institutionalized legitimate condition for electronic cash. Laws and guidelines are imperative to
utilize electronic cash run easily.

Second, the national bank ought to build up an arrangement of electronic cash store hold
proportion. Some portion of money and request stores are supplanted by electronic cash, so the
financial structure has changed. On account of quick financial advancement and swelling,
monetary exchanges are visit; the scale is bit by bit extending, and costs are steadily rising. The
financial condition in this way requires an expansion in the supreme measure of cash request. Be
that as it may, the rise of electronic cash quickens the progression of cash, yet in addition
expanded the cash request. Along these lines, it diminishes the measure of tight cash. At present,
the rise of electronic cash incredibly lessens the adequacy of fiscal arrangement, so the national
bank must control the measure of electronic cash successfully. Electronic cash ought to be
comparable to bank stores and require electronic cash store saves.

Third, the national bank ought to give store protection to electronic cash. As of not long ago, 47
many created nations have remembered electronic cash for the national store protection
framework. India has not yet settled any store protection framework, so electronic cash could

32
cause numerous issues. Along these lines, some sensible affirmation measures are vital under
exacting supervision.

Fourthly, monetary controllers ought to reinforce the standard piece of electronic cash issuance.
In the event that the national bank has the restraining infrastructure on the issuance of electronic
cash, it can take out the effect of electronic cash on the cash supply, improve the materialness of
money related strategy and balance out budgetary markets. Consequently, the national bank
needs to direct and control both electronic cash and customary money.

Fifthly, the national bank should utilize money related arrangement instruments to check the
credit extension brought about by cash substitution. The electronic installment innovation will
lessen money cost and the all out cash request, which will make the economy face the weight of
expansion. Thusly, the national bank should hold stores to manage this probability, for example,
making and expanding the electronic cash store saves.

Sixthly, at present, India's cash supply as a delegate marker of cash approach and electronic cash
will influence fiscal strategies. Therefore, accomplishing the money related arrangement markers
from quantitative pointers to value indictors is a high need for India. For example, utilizing loan
costs and other value pointers can improve India's economy

The fundamental point of the examination was to research the impact of cash supply on
expansion. For any nation's economy to encounter development, the cash supply must be
proficient and significant organization in any economy. Since money related markets are
likewise impacted by different macroeconomics factors, for example, outside swapping scale,
loan cost, financial approach, monetary strategy and modern generation. The investigation
likewise shows that there is a positive connection transport between cash supply and expansion
rate. This backings the investigation of that in-flation in India appears to discover clarification in
cash supply. Thus, the administration of Nigeria should set up genuine changes that will
guarantee that a greater amount of the cash in the course is in the gainful area. From the
examination as well, financing costs importantly affect money related extension in the economy.
It is in this manner objective to affirm the market powers of interest and supply. For instance,
moderately simple fiscal arrangement for the development of cash supply points in instigating
banks to diminish their loaning rates so as to give minimal effort of credit to private division and
subsequently giving a genuine lift to economy and inverse government should utilize the degree
of expansion as an operational guide in estimating the adequacy of its financial approach.
Henceforth if these approach measures for the cash supply in the economy were to be applied,
they might be useful to control of money related extension.

33
SUMMARY OF THE FINDING
It is evident from the table 4.1 that mean return for the study period was 14875.39with SD of
10326.89. However, skewness for the study period 0.515021 and kurtosis value was 2.155131,
Jarque-Bera statistics for the study was 19.37480 and data was not normally distributed.

the collected data has been tested by running ADF test in order to check the stationarity.at this
level we found a unit root in the data, when it was differenced the following is the test result. it is
the evident from the above table number 4.3 that the data was stationary as the ADF stats is
greater than the critical value and p value is less than 0.001.

The collected data has been tested by running ADF test in order to check the stationarity. At this
level we found a unit root in the data, when it was differenced the following is the test result. It is
the evident from the above table number 4.2.6 that the data was stationary as the ADF stats is
greater than the critical value and p value is less than 0.001.

once we found the same order of integration, we ran Johansen cointegration test to establish the
relationship between the two variables. It is evident from the above table No that the trace
statistics accepts the null hypothesis that there was no cointegrating vectors in the model.
However, in case of second hypothesis we found a cointegrating vector at 5% level. Similarly we
have the same results for Maximum Eigen value statistics. We are accepting the null hypothesis
at the first phase and rejecting the null at the second stage.

Since we found a cointegrating vector VECM model has been run. The following is the test
results. It is evident from the above table that there was no joint impact of lags on the price
moments of CPI.

it is evident from the above graph the shock on account of CPI was pushed the price down for
the first two months and later it started increasing. Indicating the shock is a temporary
phenomenon.

The collected data has been tested by running ADF test inorder to check the stationarity.at this
level we found a unit root in the data, when it was differenced the following is the test result .

The collected data has been tested by running ADF test inorder to check the stationarity.at this
level we found a unit root in the data, when it was differenced the following is the test result .It is
the evident from the above table number 4.4.2 that the data was stationary as the ADF stats sis
greater than the critical value and p value is less than 0.001.

34
 5.5 BIBLIOGRAPHY
 Beirne,j., G.M., schulze-Ghattas ,M.,& spagnol,N.(2009).volatility spillovers and
contagion from mature to emerging stock markets (IMF working paper wp/08/286)
retrieved from hhp://www.imf.org/external/pubs/ft/wp/2008/wp08286.pdf
 Yonis,M.(2011).stock market co-movement and volatility spillover between USA and
south Africa
 Journal article from a subscription database
 Patankar,S.(2012 october,2).green IT to double to $70bn 2015:gartner.the times of
Indian,p.5.
 Journal article with DOL
 www.internactionaljournalcorner.com

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ANNEXURES

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