Global financial crisis and emerging stock market contagion: A volatility impulse response function approach

•We investigate the influence of financial crisis on the BRICSs’ stock markets.•The U.S. and BRICSs’ stock markets are interrelated by their volatilities.•Global financial crisis has significant impacts on expected conditional variances.•The size and the dynamics of the impact of shock are largely market specific.•Increasing stock market integration has potential risk and cost.

By employing the volatility impulse response (VIRF) approach, this paper presents a general framework for addressing the extent of contagion effects between the BRICSs’ and U.S. stock markets and how the BRICSs’ stock markets have been influenced in the context of the 2007–2009 global financial crisis. Our empirical results show during the period of 2007–2009 global financial crisis, there are significant contagion effects from the U.S. to the BRICSs’ stock markets. Yet, the degree of stock market reactions to such shocks differs from one market to another, depending on the level of integration with the international economy. Besides, the strengthened degree of stock market integration among the U.S. and BRICS has adverse effect such that if the 2007–2009 global financial crisis occurs today it may result in heavier impact on stock market volatility nowadays compared to the crisis-era.