THE COMOVEMENTS IN INTERNATIONAL STOCK MARKETS: NEW EVIDENCE FROM LATIN AMERICAN EMERGING COUNTRIES

Mohamed Arouri, Mondher Bellalah and Duc Khuong Nguyen
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Mondher Bellalah: THEMA - Théorie économique, modélisation et applications - UCP - Université de Cergy Pontoise - Université Paris-Seine - CNRS - Centre National de la Recherche Scientifique

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Abstract: We analyze the time-variations of conditional correlations between selected Latin American emerging markets and between them and the World stock market to further shed light on the issues of capital market integration and portfolio diversification. The cross-market correlations are empirically estimated from the Engle (2002)'s DCC-GARCH model. Bai and Perron (2003)'s structural break analysis technique is also employed to test for possibly changing nature of stock market comovements. Main findings of the paper are as follows. First, the degree of cross-market comovements changed over time and has significantly increased since 1994 and onwards, which is to the large extent informative of increasing market integration. Despite the significant interdependencies among the studied markets, room for international portfolio diversification nevertheless seems largely possible. Second, it is demonstrated that the cross-market comovements are subjected to various regime shifts due essentially to major stock market events. Finally, the purpose that stock markets move much more together in times of crisis than in normal times can not be rejected according to our empirical evidence.

Keywords: Multivariate GARCH models; Structural breaks.; Stock market comovements; Latin American emerging markets; Structural breaks (search for similar items in EconPapers)
Date: 2008-01-08
Note: View the original document on HAL open archive server: https://shs.hal.science/halshs-00202943v1
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Related works:
Journal Article: The comovements in international stock markets: new evidence from Latin American emerging countries (2010)
Working Paper: The Comovements in International Stock Markets: New Evidence from Latin American Emerging Countries (2008)
Working Paper: The Comovements in International Stock Markets: New Evidence from Latin American Emerging Countries (2008)
Working Paper: The Commovements in International Stock Markets: New Evidence from Lating American Emerging Countries (2008)
Working Paper: The Comovements in International Stock Markets: New Evidence from Latin American Emerging Countries (2007)
Working Paper: The Comovements in International Stock Markets: New Evidence from Latin American Emerging Countries (2007)
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