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Financial markets of the LAC region: Does the crisis influence the financial integration?

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  • Dias, Rui
  • da Silva, Jacinto Vidigal
  • Dionísio, Andreia

Abstract

This paper aims to analyse financial integration in the emerging markets of Latin America in the context of the dot-com and subprime financial crises. To do so, different approaches were adopted to answer two questions, namely: (i) the financial markets of Latin America show significant levels of integration in periods of financial crisis? and (ii) if there are persistent long memories in the data series, will portfolio risk diversification be called into question? The results obtained suggest that the markets are partially integrated in crisis and non-crisis periods. In addition, financial series do not present significant persistent long memories arising from the subprime crisis. The 2008 crisis was found to have a greater impact on the cross correlation coefficients of the Latin American stock markets than the dot-com crisis. In terms of conclusion, it is considered that the financial markets of Latin America were affected by the dot-com and subprime crises. However, there was a re-balance in these regional markets which could create conditions for possible diversification strategies.

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  • Dias, Rui & da Silva, Jacinto Vidigal & Dionísio, Andreia, 2019. "Financial markets of the LAC region: Does the crisis influence the financial integration?," International Review of Financial Analysis, Elsevier, vol. 63(C), pages 160-173.
    • Handle: RePEc:eee:finana:v:63:y:2019:i:c:p:160-173
    DOI: 10.1016/j.irfa.2019.02.008
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    More about this item

    Keywords

    Financial integration; Emerging markets; Long memory; Risk diversification;
    All these keywords.

    JEL classification:

    • C58 - Mathematical and Quantitative Methods - - Econometric Modeling - - - Financial Econometrics
    • G10 - Financial Economics - - General Financial Markets - - - General (includes Measurement and Data)
    • G11 - Financial Economics - - General Financial Markets - - - Portfolio Choice; Investment Decisions
    • G12 - Financial Economics - - General Financial Markets - - - Asset Pricing; Trading Volume; Bond Interest Rates
    • G14 - Financial Economics - - General Financial Markets - - - Information and Market Efficiency; Event Studies; Insider Trading
    • G15 - Financial Economics - - General Financial Markets - - - International Financial Markets
    • F30 - International Economics - - International Finance - - - General

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