Dynamic Stock Market Interactions between the Canadian, Mexican, and the United States Markets: The NAFTA Experience

Giorgio Canarella, Stephen Miller and Stephen K. Pollard
Additional contact information
Stephen K. Pollard: California State University, Los Angeles

No 2008-49, Working papers from University of Connecticut, Department of Economics

Abstract: This paper explores the dynamic linkages that portray different facets of the joint probability distribution of stock market returns in NAFTA (i.e., Canada, Mexico, and the US). Our examination of interactions of the NAFTA stock markets considers three issues. First, we examine the long-run relationship between the three markets, using cointegration techniques. Second, we evaluate the dynamic relationships between the three markets, using impulse-response analysis. Finally, we explore the volatility transmission process between the three markets, using a variety of multivariate GARCH models. Our results also exhibit significant volatility transmission between the second moments of the NAFTA stock markets, albeit not homogenous. The magnitude and trend of the conditional correlations indicate that in the last few years, the Mexican stock market exhibited a tendency toward increased integration with the US market. Finally, we do note that evidence exists that the Peso and Asian financial crises as well as the stock-market crash in the US affect the return and volatility time-series relationships.

Keywords: NAFTA stock markets; cointegration; impulse response; volatility transmission (search for similar items in EconPapers)
JEL-codes: C30 C50 G10 (search for similar items in EconPapers)
Pages: 95 pages
Date: 2008-12
New Economics Papers: this item is included in nep-cfn, nep-fmk, nep-rmg and nep-sea
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (2)

Published in Stock Returns: Cyclicality, Prediction, and Economic Consequences, Ed. G. I. Ellison, Nova Science Publishers, Inc., 4th quarter 2009.

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Working Paper: Dynamic Stock Market Interactions between the Canadian, Mexican, and the United States Markets: The NAFTA Experience (2009)
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Persistent link: https://EconPapers.repec.org/RePEc:uct:uconnp:2008-49

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