Analyzing Risk-Return Trade-Offs Using ARCH and GARCH Models of the BRICS Countries

This study investigates financial markets in BRICS nations (Brazil, Russia, India, China, and South Africa) from 2003 to 2023. It examines mean returns, volatility, skewness, and kurtosis, assessing normality and data stationarity. ARCH-GARCH models uncover conditional heteroskedasticity and volatility clustering. It also explores mean reversion and momentum effects in the Nifty and MOEX indices. Findings show negative, near-zero mean returns, except for SSEC, which is modestly positive. Serial correlation suggests past values impact current returns. Volatility varies, with MOEX and SSEC having higher levels. ARCH-GARCH models indicate volatility clustering and non-normal return distributions. Mean reversion and momentum effects are identified in Nifty and MOEX, benefiting investors, financial institutions, and policymakers. This research informs investment strategies, risk management, and financial forecasts in BRICS economies, contributing to the understanding of the global financial landscape and potential contagion effects.