Asymmetric Impact of Interest Rate, Exchange Rate and Oil Prices on Stock Price of BRICS

Abstract

The degree of variance in the stock price over time is known as volatility. Many factors influence the stock price, including demand, supply, and macroeconomic policy. Stock traders take more risks while investing in a tumultuous market. This study envisages the asymmetric impact of interest rate, exchange rate and oil price on stock price in the case of BRICS economies. Asymmetric ARDL approach is employed to unveil the asymmetric long-run connection among the variables from 1990 to 2017. The findings revealed that there is an asymmetric relationship between interest rate and stock prices in all of the economies studied. However, it has been confirmed that a negative interest rate has a greater impact on stock prices than a positive interest rate. Furthermore, the results indicate that in all of the selected economies an asymmetric link exists between the exchange rate, oil price, and stock prices. It is also established that a negative change in the exchange rate and the oil price has a greater impact on stock prices than a positive change in the exchange rate and the oil price. The results of the study confirmed the existence of an asymmetry link between interest rates and stock prices in BRICS countries, indicating that positive and negative interest rates have different effects on stock price volatility, which must be taken into account when developing a policy.