Latin American stock market dynamics and comovement

Simeon Coleman (), Vitor Leone and Otavio R. de Medeiros

International Journal of Finance & Economics, 2019, vol. 24, issue 3, 1109-1129

Abstract: With the economic relevance of the relationships among emerging and frontier equity markets becoming increasingly significant, this paper investigates comovement among returns from six Latin American stock markets (Mexico [BMV], Brazil [BOVESPA], Chile [IPSA], Peru [IGBVL], Argentina [MERVAL], and Venezuela [IBVC]) and also with the U.S. S&P 500 Composite index. In part, we employ principal component analyses, to account for the maximum portion of the variance present in the returns by examining rolling windows with 8‐, 6‐, 4‐, 3‐, 2‐, and 1‐year periods. We also investigate the incidence of structural breaks and comovement, aiming to uncover the dynamics in comovements among these markets. We find evidence of high comovement among the Latin American markets, and also with the U.S. markets. Venezuela and Mexico's equity markets are at the extremes. However, our results do not corroborate findings of clear evidence, reported in previous studies, of the United States having a leading role in the region.

Date: 2019
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