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Measuring the Influence of the US Market over Observed Interdependencies in Latin America

Author

Listed:
  • Alba Regina Moretti

    (Departamento de Matemática, Universidade Federal Rural do Rio de Janeiro (UFRRJ))

  • Beatriz Vaz de Melo Mendes

    (Departamento de Estatística, Universidade Federal do Rio de Janeiro (UFRJ))

Abstract

The modeling of the extremal dependence structure can be made through parametric models classified in two families: Logistic and Mixed, which contain the symmetric and asymmetric models. The bivariate models are very useful in practical applications on the extreme value theory, in particular in a financial area. Considering the strong influence of the North American market on other financial markets, we investigate how does the dependence structure among the Latin American markets change after filtering the influence of the North American market. To remove that influence, we carry on a polynomial regression with GARCH (1,1) errors, and fit the bivariate extreme value models to the pairs of monthly maxima and minima of the standardized regression residuals.

Suggested Citation

  • Alba Regina Moretti & Beatriz Vaz de Melo Mendes, 2005. "Measuring the Influence of the US Market over Observed Interdependencies in Latin America," Brazilian Review of Finance, Brazilian Society of Finance, vol. 3(1), pages 123-137.
    • Handle: RePEc:brf:journl:v:3:y:2005:i:1:p:123-137
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    More about this item

    Keywords

    extreme value theory; bivariate models; polinomial regressions; GARCH models;
    All these keywords.

    JEL classification:

    • C19 - Mathematical and Quantitative Methods - - Econometric and Statistical Methods and Methodology: General - - - Other
    • C51 - Mathematical and Quantitative Methods - - Econometric Modeling - - - Model Construction and Estimation
    • G14 - Financial Economics - - General Financial Markets - - - Information and Market Efficiency; Event Studies; Insider Trading

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