Volatility transmission between US and Latin American stock markets: Testing the decoupling hypothesis
Marcela Gutiérrez and
Diego Agudelo ()
Research in International Business and Finance, 2017, vol. 39, issue PA, 115-127
We test for volatility transmission between US and the six largest Latin American stock markets (Argentina, Brazil, Chile, Colombia, Mexico and Peru) using MGARCH-BEKK models in daily frequency from March 1993 to March 2013. As expected, we find strong evidence of volatility transmission from US to the Latin American markets but not so in the opposite direction. Besides, we reject the hypothesis of decoupling between US, Brazil and Mexico: the conditional correlations between US and the two emerging markets have steadily increased over the sample period and volatility transmissions have become more significant from 2003 onwards. We also find some evidence on the leadership of Brazil in the region, being the only Latin American stock market consistently transmitting volatility to US. We discuss implications for the financial integration literature.
Keywords: Volatility transmission; MGARCH; Decoupling hypothesis; Emerging markets; Conditional correlation; Financial integration (search for similar items in EconPapers)
JEL-codes: G15 F36 C32 (search for similar items in EconPapers)
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Working Paper: Volatility transmission between US and Latin American Stock Markets: testing the decoupling hypothesis (2015)
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Persistent link: https://EconPapers.repec.org/RePEc:eee:riibaf:v:39:y:2017:i:pa:p:115-127
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