Stock market co-movement in Latin America and the US: evidence from a new approach

Puneet Vatsa, Hem Basnet and Frank Mixon

Journal of Financial Economic Policy, 2021, vol. 14, issue 2, 162-171

Abstract: Purpose - The purpose of this paper is to investigate the interlinkages among four major stock markets in Latin America, i.e., those in Argentina, Brazil, Chile, and Mexico, as well as their associations with the US stock market, which influences financial markets globally. Design/methodology/approach - Using the newly developed Hamilton filter methodology (Hamilton, 2018), the authors decompose each stock series to extract cyclical components. Findings - Results indicate that the US S&P 500 is weakly contemporaneously correlated with stock market indices in Brazil, Mexico and Argentina, whereas it also leads the latter by three months. As such, sufficient time is available for policymakers and investors to enhance their forecasts of the latter. Originality/value - Results indicate that the US S&P 500 is weakly contemporaneously correlated with stock market indices in Brazil, Mexico and Argentina, whereas it also leads the latter by three months. As such, sufficient time is available for policymakers and investors to enhance their forecasts of the latter.

Keywords: Financial markets; Financial economics; Hamilton filter; Time series econometrics; Stock market indices; C22; C58; G10 (search for similar items in EconPapers)
Date: 2021
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Persistent link: https://EconPapers.repec.org/RePEc:eme:jfeppp:jfep-02-2021-0047

DOI: 10.1108/JFEP-02-2021-0047

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