Navigating the pandemic storm: how oil volatility, CDS, and the fear index altered BRICS markets

Abstract This study investigates the dynamic interconnectedness among BRICS stock markets, crude oil volatility (OVX), global investor fear (VIX), and sovereign credit default swap (CDS) spreads before and during the COVID-19 pandemic. Using daily data from December 2010 to May 2022, I apply a time-varying parameter vector autoregression (TVP-VAR) framework to capture evolving volatility spillovers across markets. The analysis distinguishes between the pre-pandemic and pandemic periods to assess how systemic risk transmission changes under extreme global shocks. The findings show that overall connectedness increased markedly during the pandemic, indicating stronger and more complex contagion effects. Several BRICS stock markets and sovereign CDS spreads shifted roles from volatility receivers to transmitters, while VIX and OVX primarily absorbed volatility. These results highlight the multidimensional nature of systemic risk, transmitted simultaneously through sentiment, commodity, and credit channels. The study contributes to the literature by providing an integrated, time-varying assessment of financial contagion in emerging markets and offers practical implications for investors and policymakers seeking to enhance risk management and financial stability during periods of heightened uncertainty.