Stock pricing in Latin America: The synchronicity effect

Bruno Figlioli and Fabiano Guasti Lima

Emerging Markets Review, 2019, vol. 39, issue C, 1-17

Abstract: This paper investigated whether the stock price synchronicity level (SPSL) is a pricing factor in the Latin American scenario. To do so, the shares with the highest liquidity level listed in the stock exchange in five Latin American (LA) countries (Argentina, Brazil, Chile, Mexico and Peru) were used. The results indicated that the SPSL is associated with a positive premium. This premium was obtained by the CAPM model and by the Fama-French three- and five-factor models. There was evidence that the average SPSL increases in periods of greater turmoil in the financial markets. Moreover, it was found that the SPSLs are not associated monotonically with the efficiency levels of stock prices. Overall, the use of the SPSL factor in asset pricing models reduced the bias in estimating the stock premiums in LA.

Keywords: Synchronicity; Idiosyncratic risk; Latin America; Market efficiency (search for similar items in EconPapers)
JEL-codes: G1 G11 G12 G14 (search for similar items in EconPapers)
Date: 2019
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (3)

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Persistent link: https://EconPapers.repec.org/RePEc:eee:ememar:v:39:y:2019:i:c:p:1-17

DOI: 10.1016/j.ememar.2019.03.002

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