Causality and Cointegration in Stock Markets: The Case of Latin America
AbstractThis paper analyzes causality and cointegration relationships among stock markets for Latin America and the United States. Within a simple framework causality and cointegration is tested for Argentina, Brazil, Chile, Colombia, Mexico, Peru, Venezuela and the US. We found no evidence of cointegration among these stock markets but short-run causality could not be rejected. Furthermore, we use impulse response functions to analyze the relative impact of shocks in the US stock index (Dow Jones) on Latin American indexes. Evidence suggests that the responses differ significantly among these countries. These findings imply that there are valuable opportunities to international investors from diversifying in US and Latin American stocks.
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Bibliographic InfoPaper provided by Central Bank of Brazil, Research Department in its series Working Papers Series with number 56.
Date of creation: Dec 2002
Date of revision:
Publication status: Published in Brazilian journal of Business Economics, Vol. 3, no. 2, (-Aug 2003).
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Web page: http://www.bcb.gov.br/?english
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