Modelling the Sovereign Linkages of Key Latin American Economies
AbstractThis paper models the cross-market dynamics in an emerging market regional setting using a homogenous set of international sovereign bonds issued by key Latin American economies. We employ Johansen’s and a modified three-step procedure, which generates portfolio adjustment weights while accounting for common volatility effects across markets. The bonds are grouped based upon maturities across different markets in the Latin American region. This paper provides insights into the nature of sovereign linkages of key Latin American markets generally, and sovereign international bonds with varying maturities more specifically. The empirical results also highlight the manner in which sovereign linkages evolve in Latin America and the required portfolio adjustments following a credit event in the region.
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Bibliographic InfoPaper provided by Deakin University, Faculty of Business and Law, School of Accounting, Economics and Finance in its series Financial Econometics Series with number 2012_03.
Date of creation: 26 Dec 2012
Date of revision:
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Common long-run components; Sovereign linkages; Latin America; Sovereign international bonds; Portfolio adjustment weight.;
Other versions of this item:
- Thuraisamy, Kannan & Gannon, Gerard, 2013. "Modelling the sovereign linkages of key Latin American economies," Journal of International Financial Markets, Institutions and Money, Elsevier, vol. 23(C), pages 222-239.
- G15 - Financial Economics - - General Financial Markets - - - International Financial Markets
- G12 - Financial Economics - - General Financial Markets - - - Asset Pricing; Trading Volume; Bond Interest Rates
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