The Latin American and Spanish Stock markets

Henry Aray ()

No 06/12, ThE Papers from Department of Economic Theory and Economic History of the University of Granada.

Abstract: In this article I analyze the Spanish stock market in an international setting. Using a simple Markov regime switching model I get a time varying measure of the effect of the return on a Latin American portfolio on the Spanish stock returns. The evidence can be summarized as follows. First, I find that this effect is positive and no so large. However, it has increased since the mid-nineties. Second, evidence for the returns on size portfolios shows that most of the effect accrues indirectly through common risk factors. The portfolio composes of stocks with small capitalization is the most affected. Nevertheless, the relative effect of the Latin America to the effect of the world only increases for the portfolio composes of stocks with big capitalization since the mid-nineties. Third, evidence for the returns on sector portfolios shows that the most active sectors investing in Latin America are the most affected. Fourth, I conclude that there is no a positive relatio nship between â-risk and flows of foreign direct investment.

Keywords: Markov switching model; maximum likelihood estimation; stock returns. (search for similar items in EconPapers)
JEL-codes: C22 G15 (search for similar items in EconPapers)
Pages: 32 pages
Date: 2006-12-14
New Economics Papers: this item is included in nep-cfn, nep-his and nep-rmg
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Persistent link: https://EconPapers.repec.org/RePEc:gra:wpaper:06/12

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