A changepoint analysis of exchange rate and commodity price risks for Latin American stock markets

Hans Manner (), Gabriel Rodríguez and Florian St ckler ()
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Hans Manner: University of Graz, Austria
Florian St ckler: University of Graz, Austria

No 2021-14, Graz Economics Papers from University of Graz, Department of Economics

Abstract: Focusing on countries whose economies are exposed to fluctuations in commodity prices and exchange rates, we study the vulnerability of these stock market returns to exchange rate and commodity price shocks. Methodologically, we rely on non-parametric structural break tests and we allow for multiple changepoints in the volatilities of the different variables and for distinct breaks in the dependence between the series. This approach allows separating changes in country- and commodity specific risk and changes in the degree of spillover. The return distributions are modeled using a Copula-GARCH model incorporating the estimated changepoints and we measure risk-spillovers with the conditional Value-at-Risk. We find evidence for various changepoints at different points in time, implying changes in risk and spillovers. In particular, there is evidence of increased spillover risk after the outbreak of the global financial crisis in 2008, but conditional risk is also high after the outbreak of Covid-19.

Keywords: stock markets; commodity prices; changepoint analysis; volatility; dependence modeling; copula; CoVaR. (search for similar items in EconPapers)
JEL-codes: C12 C32 C52 C53 (search for similar items in EconPapers)
Date: 2021-12
New Economics Papers: this item is included in nep-cwa, nep-ore and nep-rmg
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Journal Article: A changepoint analysis of exchange rate and commodity price risks for Latin American stock markets (2024)
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