U.S. and Latin American stock market linkages

Abdelmounaim Lahrech and Kevin Sylwester

Journal of International Money and Finance, 2011, vol. 30, issue 7, 1341-1357

Abstract: This paper examines to what extent the Latin American equity markets of Argentina, Brazil, Chile and Mexico have become more integrated with the US equity market. We empirically measure integration by finding the dynamic conditional correlation (DCC) between each market and that in the U.S. using a DCC multivariate GARCH model. We then track how these correlations evolve over time using a smooth transition model which not only shows when greater integration first occurred but also how long it took these correlations to transition to their new levels. Our sample period stretches from December 30th, 1988 to March 26th, 2004. Results show an increase in the degree of co-movement between these countries’ equity returns and those in the U.S. although the magnitude and speed of these increases greatly varies across these four countries.

Keywords: Latin American stock markets; Dynamic conditional correlation; Smooth transition (search for similar items in EconPapers)
Date: 2011
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Citations: View citations in EconPapers (35)

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Persistent link: https://EconPapers.repec.org/RePEc:eee:jimfin:v:30:y:2011:i:7:p:1341-1357

DOI: 10.1016/j.jimonfin.2011.07.004

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