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This paper assesses the extent of the transmission of financial shocks between South Africa and other members of the BRICS grouping in order to infer the degree of contagion during the period 1996-2012. The paper makes use of a multivariate VAR-DCC-GARCH model for this end. The paper finds evidence of cross-transmission and dependence between South Africa and Brazil. However, the empirical results show that South Africa is more affected by crises originating from China, India and Russia than these countries are by crises originating from South Africa. The findings of this paper should be of interest to policy makers in the BRICS grouping should they be considering the possibility of full capital market liberalization and to the international investor who is looking at diversifying portfolios in the BRICS grouping..

This paper attempts to assess the extent of volatility spillovers between the equity market and the foreign exchange market in South Africa. Multistep family of the General Autoregressive Conditional Heteroskedasticity models are used for this end, whereby volatility shocks obtained from the mean equation estimation in each market are included in the conditional volatility of the other market, respectively. The paper selects the appropriate volatility models for each market following criteria such as covariance stationarity, persistence in variance and leverage effects. The finding of the paper indicates that there is a unidirectional relationship in terms of volatility spillovers from the equity market to the foreign exchange market. The paper supports the view that the extent of foreign participation in the South African equity market possibly contributes to this phenomenon.

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