Do Emerging Equity Markets Respond Symmetrically to US Market Upturns and Downturns? Evidence from Latin America

Rahul Verma and Priti Verma
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Rahul Verma: College of Business, University of Houston, U.S.A.
Priti Verma: College of Business, Texas A&M University, Kingsville, U.S.A.

International Journal of Business and Economics, 2005, vol. 4, issue 3, 193-208

Abstract: We investigate the existence of asymmetries in Latin American equity markets to upturns and downturns in the US stock market. We find the magnitude and duration of an upturn in the US market are fully reflected in equity markets of Latin America and that the impact is significantly different from that of a downturn. The results are consistent with the view that international investors react more sharply to downturns than upturns. We conclude that if portfolios are formed based on average co-movements, which assume symmetry, the performance of the investment may be worse than expected in down markets.

Keywords: equity markets; Latin America; response asymmetries (search for similar items in EconPapers)
JEL-codes: F30 G15 O54 (search for similar items in EconPapers)
Date: 2005
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Citations: View citations in EconPapers (2)

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