Skyscrapers symbolizing BRIC nations rising from financial waves.

Decoding BRIC Volatility: What the 2008 Financial Crisis Reveals About Emerging Markets

Beau Callahan in Business & Economy August 2025 • 4 min read.

"Explore how Brazil, Russia, India, and China responded to the 2008 crisis and what it means for investors today. Uncover the hidden trends of BRIC markets!"

The global financial crisis of 2008 sent shockwaves through economies worldwide, offering a unique lens through which to examine the resilience and adaptability of both established and emerging markets. Brazil, Russia, India, and China—collectively known as the BRIC nations—have long been identified as potential future leaders in the global economy. The 2008 crisis provided an opportunity to assess whether their capital markets behaved more like those of industrialized nations or if distinct characteristics persisted.

Understanding how these markets respond to crises is crucial for investors, policymakers, and anyone interested in the future of global finance. In times of economic turmoil, capital markets often exhibit increased volatility, as investors react to uncertainty and shift their strategies. Analyzing this volatility can reveal valuable insights into the maturity and stability of a market.

This article delves into a research paper that investigated the volatility of BRIC capital markets during the 2008 financial crisis. By comparing their behavior to that of developed economies such as the United States, Japan, the United Kingdom, and Germany, the study aimed to determine whether BRIC nations had achieved a level of market sophistication comparable to their industrialized counterparts.

Key Findings: BRIC Volatility in the Face of Crisis

Skyscrapers symbolizing BRIC nations rising from financial waves.

The research applied sophisticated statistical models—specifically GARCH, EGARCH, and TARCH—to analyze market volatility. These models are designed to capture the nuances of how volatility changes over time, including the impact of shocks (sudden unexpected events) and the presence of asymmetry (where negative news affects volatility differently than positive news).

The study revealed several key similarities and differences between BRIC and industrialized markets during the 2008 crisis:

Persistence of Shocks: Both BRIC and industrialized markets showed that shocks had lasting effects on volatility.
Volatility Asymmetry: Both market groups experienced volatility asymmetry, meaning that negative market movements (like a stock market crash) tended to increase volatility more than positive movements of the same magnitude.
Delayed Reactions: Both groups demonstrated delayed reactions to market changes, indicating that volatility doesn't adjust instantaneously to new information.

However, the study also highlighted crucial distinctions. The BRIC markets exhibited less persistence to volatility shocks, suggesting that the effects of unexpected events faded more quickly compared to industrialized nations. They also showed less asymmetry, meaning that the difference in volatility response to good and bad news was less pronounced. Finally, the BRIC markets demonstrated faster reactions of volatility to market changes, indicating a quicker adjustment to new information.

Implications for Investors and the Future of BRIC Economies

While the BRIC nations have made significant strides in aligning their market behavior with developed economies, the study suggests that key differences persist. Investors should be aware of these distinctions, particularly the faster reaction times and reduced asymmetry in BRIC markets, which may offer unique opportunities for nimble investment strategies. As these economies continue to mature, further research will be essential to track their evolving market dynamics and inform investment decisions.

About this Article -

This article was crafted using a human-AI hybrid and collaborative approach. AI assisted our team with initial drafting, research insights, identifying key questions, and image generation. Our human editors guided topic selection, defined the angle, structured the content, ensured factual accuracy and relevance, refined the tone, and conducted thorough editing to deliver helpful, high-quality information.See our About page for more information.

This article is based on research published under:

DOI-LINK: 10.5897/ajbm2013.7162, Alternate LINK

Title: Volatility Behaviour Of Bric Capital Markets In The 2008 International Financial Crisis

Journal: African Journal of Business Management

Publisher: Academic Journals

Authors: Pimenta Junior Tabajara, Guasti Lima Fabiano, Eduardo Gaio Luiz

Published: 2014-06-14

Everything You Need To Know

How did the 2008 financial crisis help in understanding the financial behaviors of the BRIC nations?

The 2008 financial crisis served as a stress test for emerging markets, including Brazil, Russia, India, and China (the BRIC nations). It allowed for an assessment of whether their capital markets behaved similarly to those of industrialized nations or retained distinct characteristics. Understanding this behavior is crucial for investors and policymakers.

What specific statistical models were used to analyze the volatility of BRIC capital markets during the 2008 crisis, and why were these chosen?

The research paper used GARCH, EGARCH, and TARCH models to analyze market volatility in both BRIC and developed economies. These models are designed to capture how volatility changes over time, including the impact of shocks and the presence of asymmetry. Other models could have been applied but these models are time-tested.

What does "persistence of shocks" mean in the context of BRIC markets during the 2008 financial crisis, and how did it differ from industrialized nations?

The persistence of shocks refers to how long the effects of unexpected events (shocks) last on market volatility. Both BRIC and industrialized markets demonstrated that shocks had lasting effects. However, BRIC markets exhibited less persistence to volatility shocks, indicating that the effects of unexpected events faded more quickly compared to industrialized nations. This suggests a difference in how quickly these markets absorb and move on from crises.

What is "volatility asymmetry," and how was it observed differently in BRIC markets compared to developed economies during the 2008 crisis?

Volatility asymmetry refers to the phenomenon where negative market movements (like a stock market crash) tend to increase volatility more than positive movements of the same magnitude. While both BRIC and industrialized markets experienced volatility asymmetry, the BRIC markets showed less asymmetry, meaning that the difference in volatility response to good and bad news was less pronounced. This could indicate a more balanced investor sentiment or different risk management strategies in BRIC markets compared to developed economies. The absence of asymmetry would have pointed towards equal reactions to negative and positive news.

What are the implications of the research findings regarding the faster reaction times and reduced asymmetry in BRIC markets for investors?

The research indicated that BRIC markets exhibited faster reactions of volatility to market changes compared to industrialized nations. This quicker adjustment to new information, combined with reduced asymmetry, suggests that nimble investment strategies may be particularly effective in BRIC markets. Investors need to consider these factors when allocating capital to these regions, as well as how these factors may evolve as these economies continue to mature. Ignoring quicker reaction times can lead to missed investment opportunities.