Modelling emotional contagious effect between US and BRICS-5

Purpose This study aims to examine how the stock market of Brazil, Russia, India, China and South Africa (BRICS) is reacting against the fear and greed mood of US investors. For that purpose, the author used the CNN US Fear and Greed Index (F&G Index) as an independent variable to examine its impact on the stock prices of BRICS countries. Design/methodology/approach The author has applied a combination of methods supporting each other to decipher the unfolded interrelation between the US stock market and the BRICS stocks, especially related to the current time scenario. First, the DCC GARCH model is estimated to examine volatility transmission and conditional correlation between the same. Wavelet coherence plots were also used to intercept interaction between the F&G index and BRICS stocks. Quantile-and-quantile regression are also applied to examine the asymmetrical causal impact of the US F&G index on the stock prices of BRICS countries. Findings The US F&G Index acts as a global sentiment driver, with varying degrees of influence on the stock of BRICS countries. Brazil, South Africa and India have significant dynamic associations with the US F&G Index, whereas China and Russia exhibit weaker or negligible coherence. Fear in the US market has a more pronounced and significant impact on the BRICS stock markets compared to greed, and this asymmetry underscores the vulnerability of BRICS economies to negative US market sentiment. These findings highlight the asymmetric and heterogeneous impact of US market sentiment on BRICS economies, with implications for portfolio diversification, risk management and policy strategies in emerging markets. Originality/value The F&G index comprises seven different aspects of the stock market and may provide robust information on how the overall behaviours of US investors affect BRICS stocks. A comprehensive indicator like the CNN US Fear and Greed Index has not been explored previously in the given context, as per the best knowledge of the author. Therefore, the author gets the motivation to examine the impact of the US Fear and Greed Index on the stock prices of BRICS countries.