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Do on/off time series models reproduce emerging stock market comovements?

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  • Mohamed el hédi Arouri

    ()
    (EDHEC Business School)

  • Fredj Jawadi

    ()
    (University of Evry Val d''''Essonne & Amiens School of Management)

Abstract

Using nonlinear modeling tools, this study investigates the comovements between the Mexican and the world stock markets over the last three decades. While the previous works only highlight some evidence of comovements, our paper aims to specify the different time-varying links and mechanisms characterizing the Mexican stock market through the comparison of two nonlinear error correction models (NECMs). Our findings point out strong evidence of time-varying and nonlinear mean-reversion and links between Mexico and the world stock market, which reflects the significant development of Mexican stock market during the last decades. The specification of the nature of these links is interesting for investment decisions in emerging markets.

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Bibliographic Info

Article provided by AccessEcon in its journal Economics Bulletin.

Volume (Year): 31 (2011)
Issue (Month): 1 ()
Pages: 960-968

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Handle: RePEc:ebl:ecbull:eb-10-00269

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Keywords: Keywords: Emerging Stock Market Links; Nonlinearity.;

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  9. Giorgio De Santis & Selahattin Imrohoroglu, 1994. "Stock returns and volatility in emerging financial markets," Discussion Paper / Institute for Empirical Macroeconomics 93, Federal Reserve Bank of Minneapolis.
  10. Wang, Kuan-Min & Nguyen Thi, Thanh-Binh, 2007. "Testing for contagion under asymmetric dynamics: Evidence from the stock markets between US and Taiwan," Physica A: Statistical Mechanics and its Applications, Elsevier, vol. 376(C), pages 422-432.
  11. Gerard, Bruno & Thanyalakpark, Kessara & Batten, Jonathan A., 2003. "Are the East Asian markets integrated? Evidence from the ICAPM," Journal of Economics and Business, Elsevier, vol. 55(5-6), pages 585-607.
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