INTEGRATED MARKETS OF LATIN AMERICAN: A COINTEGRATION ANALYSIS, MERCADO INTEGRADO LATINOAMERICANO: UN ANALISIS DE COINTEGRACION

Eduardo Sandoval and Macarena Soto

Revista Internacional Administracion & Finanzas, 2016, vol. 9, issue 2, 1-17

Abstract: This article examines the existence of a long-term equilibrium relationship between the stock markets from Colombia, Chile and Peru, a year before the implementation of Latin American Integrated Markets’ infrastructure (MILA in Spanish) and until three years later. After proving that there exists nonstationarity in the original series and stationarity in the stock market returns, the Johansen cointegration test was applied. The results revealed that a year before and during the first year of operation, the MILA stock markets were not cointegrated. During the second and third year, the statistical tests indicate that there is one cointegrating vector, which means that the markets showed a long-term equilibrium relationship between their stock indices. This implies that the economic and financial fundamentals related to one stock market may have an impact on the long term performance of the rest of equity markets, leading in turn that the spillover and contagion effects can become more significant between markets, thus decreasing the potential benefits of international diversification within the MILA.

Keywords: MILA; Financial Integration; Cointegration (search for similar items in EconPapers)
JEL-codes: G13 G17 (search for similar items in EconPapers)
Date: 2016
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (1)

Downloads: (external link)
http://www.theibfr2.com/RePEc/ibf/riafin/riaf-v9n2-2016/RIAF-V9N2-2016-1.pdf (application/pdf)

Related works:
This item may be available elsewhere in EconPapers: Search for items with the same title.

Export reference: BibTeX RIS (EndNote, ProCite, RefMan) HTML/Text

Persistent link: https://EconPapers.repec.org/RePEc:ibf:riafin:v:9:y:2016:i:2:p:1-17

Access Statistics for this article

Revista Internacional Administracion & Finanzas is currently edited by Terrance Jalbert

More articles in Revista Internacional Administracion & Finanzas from The Institute for Business and Finance Research
Bibliographic data for series maintained by Mercedes Jalbert ( this e-mail address is bad, please contact ).