Advanced Search
MyIDEAS: Login

The Comovements in International Stock Markets: New Evidence from Latin American Emerging Countries

Contents:

Author Info

  • Mohamed El Hedi Arouri

    ()
    (LEO, University of Orleans)

  • Mondher Bellalah

    ()
    (University of Cergy-Pontoise)

  • Duc Khuong Nguyen

    ()
    (ISC Paris School of Management)

Abstract

We analyze the time-variations of conditional correlations between selected Latin American emerging markets and between them and the World stock market to further shed light on the issues of capital market integration and portfolio diversification. The cross-market correlations are empirically estimated from the Engle(2002)’s DCC-GARCH model. Bai and Perron (2003)’s structural break analysis technique is also employed to test for possibly changing nature of stock market comovements. Main findings of the paper are as follows.First, the degree of cross-market comovements changed over time and has significantly increased since 1994 and onwards, which is to the large extent informative of increasing market integration. Despite the significant interdependencies among the studied markets, room for international portfolio diversification nevertheless seems largely possible. Second, it is demonstrated that the cross-market comovements are subjected to various regime shifts due essentially to major stock market events. Finally, the purpose that stock markets move much more together in times of crisis than in normal times can not be rejected according to our empirical evidence.

Download Info

If you experience problems downloading a file, check if you have the proper application to view it first. In case of further problems read the IDEAS help page. Note that these files are not on the IDEAS site. Please be patient as the files may be large.
File URL: http://www.depocenwp.org/upload/pubs/NguyenDucKhuong/THE%20COMOVEMENTS%20IN%20INTERNATIONAL%20STOCK%20MARKETS.pdf
Download Restriction: no

Bibliographic Info

Paper provided by Development and Policies Research Center (DEPOCEN), Vietnam in its series Working Papers with number 05.

as in new window
Length: 28 pages
Date of creation: 2007
Date of revision:
Handle: RePEc:dpc:wpaper:0507

Contact details of provider:
Postal: 8-9 2nd Floor, 216 Tran Quang Khai Street, Hanoi
Phone: 844-3935-1419
Fax: 844-3935-1418
Email:
Web page: http://www.depocenwp.org
More information through EDIRC

Related research

Keywords: Stock market comovements; Latin American emerging markets; Multivariate GARCH models; Structural breaks;

Other versions of this item:

Find related papers by JEL classification:

References

References listed on IDEAS
Please report citation or reference errors to , or , if you are the registered author of the cited work, log in to your RePEc Author Service profile, click on "citations" and make appropriate adjustments.:
as in new window
  1. Bollerslev, Tim, 1986. "Generalized autoregressive conditional heteroskedasticity," Journal of Econometrics, Elsevier, vol. 31(3), pages 307-327, April.
  2. Johnson, Robert & Soenen, Luc, 2003. "Economic integration and stock market comovement in the Americas," Journal of Multinational Financial Management, Elsevier, vol. 13(1), pages 85-100, February.
  3. Geert Bekaert & Campbell R. Harvey, 1997. "Foreign Speculators and Emerging Equity Markets," NBER Working Papers 6312, National Bureau of Economic Research, Inc.
  4. Andrea Beltratti & Claudio Morana, 2006. "Comovements in International Stock Markets," ICER Working Papers 3-2006, ICER - International Centre for Economic Research.
  5. Perron, P. & Bai, J., 1995. "Estimating and Testing Linear Models with Multiple Structural Changes," Cahiers de recherche 9552, Universite de Montreal, Departement de sciences economiques.
  6. Syriopoulos, Theodore, 2007. "Dynamic linkages between emerging European and developed stock markets: Has the EMU any impact?," International Review of Financial Analysis, Elsevier, vol. 16(1), pages 41-60.
  7. Geert Bekaert & Robert J. Hodrick & Xiaoyan Zhang, 2005. "International Stock Return Comovements," NBER Working Papers 11906, National Bureau of Economic Research, Inc.
  8. Chen, Gong-meng & Firth, Michael & Meng Rui, Oliver, 2002. "Stock market linkages: Evidence from Latin America," Journal of Banking & Finance, Elsevier, vol. 26(6), pages 1113-1141, June.
  9. Kee-Hong Bae & G. Andrew Karolyi & Rene M. Stulz, 2000. "A New Approach to Measuring Financial Contagion," NBER Working Papers 7913, National Bureau of Economic Research, Inc.
  10. Christofi, A. & Pericli, A., 1999. "Correlation in price changes and volatility of major Latin American stock markets," Journal of Multinational Financial Management, Elsevier, vol. 9(1), pages 79-93, January.
  11. Jayasuriya, Shamila, 2005. "Stock market liberalization and volatility in the presence of favorable market characteristics and institutions," Emerging Markets Review, Elsevier, vol. 6(2), pages 170-191, June.
  12. Sims, Christopher A, 1980. "Macroeconomics and Reality," Econometrica, Econometric Society, vol. 48(1), pages 1-48, January.
  13. BAI, Jushan & PERRON, Pierre, 1998. "Computation and Analysis of Multiple Structural-Change Models," Cahiers de recherche 9807, Universite de Montreal, Departement de sciences economiques.
  14. Kim, E Han & Singal, Vijay, 2000. "Stock Market Openings: Experience of Emerging Economies," The Journal of Business, University of Chicago Press, vol. 73(1), pages 25-66, January.
  15. Hsin, Chin-Wen, 2004. "A multilateral approach to examining the comovements among major world equity markets," International Review of Financial Analysis, Elsevier, vol. 13(4), pages 433-462.
  16. Geert Bekaert & Campbell R. Harvey, 1994. "Time-Varying World Market Integration," NBER Working Papers 4843, National Bureau of Economic Research, Inc.
  17. William F. Sharpe, 1964. "Capital Asset Prices: A Theory Of Market Equilibrium Under Conditions Of Risk," Journal of Finance, American Finance Association, vol. 19(3), pages 425-442, 09.
  18. Geert Bekaert & Campbell R. Harvey, 1997. "Emerging Equity Market Volatility," NBER Working Papers 5307, National Bureau of Economic Research, Inc.
  19. Harvey, Campbell R, 1995. "Predictable Risk and Returns in Emerging Markets," Review of Financial Studies, Society for Financial Studies, vol. 8(3), pages 773-816.
  20. Fujii, Eiji, 2005. "Intra and inter-regional causal linkages of emerging stock markets: evidence from Asia and Latin America in and out of crises," Journal of International Financial Markets, Institutions and Money, Elsevier, vol. 15(4), pages 315-342, October.
  21. William Miles, 2002. "Financial Deregulation And Volatility In Emerging Equity Markets," Journal of Economic Development, Chung-Ang Unviersity, Department of Economics, vol. 27(2), pages 113-126, December.
  22. Karolyi, G Andrew, 1995. "A Multivariate GARCH Model of International Transmissions of Stock Returns and Volatility: The Case of the United States and Canada," Journal of Business & Economic Statistics, American Statistical Association, vol. 13(1), pages 11-25, January.
  23. Eun, Cheol S. & Shim, Sangdal, 1989. "International Transmission of Stock Market Movements," Journal of Financial and Quantitative Analysis, Cambridge University Press, vol. 24(02), pages 241-256, June.
  24. Harry Markowitz, 1952. "Portfolio Selection," Journal of Finance, American Finance Association, vol. 7(1), pages 77-91, 03.
Full references (including those not matched with items on IDEAS)

Citations

Citations are extracted by the CitEc Project, subscribe to its RSS feed for this item.
as in new window

Cited by:
  1. Fernanda G Barba & Paulo S Ceretta, 2011. "Risk transmission between Latin America stock markets and the US: impacts of the 2007/2008 Crisis," Economics Bulletin, AccessEcon, vol. 31(2), pages 1025-1037.
  2. Park, Yung Chul & Park, Hail, 2014. "Stock Market Co-Movement and Exchange Rate Flexibility: Experience of the Republic of Korea," ADBI Working Papers 479, Asian Development Bank Institute.
  3. repec:wyi:journl:002183 is not listed on IDEAS

Lists

This item is not listed on Wikipedia, on a reading list or among the top items on IDEAS.

Statistics

Access and download statistics

Corrections

When requesting a correction, please mention this item's handle: RePEc:dpc:wpaper:0507. See general information about how to correct material in RePEc.

For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: (Doan Quang Hung).

If you have authored this item and are not yet registered with RePEc, we encourage you to do it here. This allows to link your profile to this item. It also allows you to accept potential citations to this item that we are uncertain about.

If references are entirely missing, you can add them using this form.

If the full references list an item that is present in RePEc, but the system did not link to it, you can help with this form.

If you know of missing items citing this one, you can help us creating those links by adding the relevant references in the same way as above, for each refering item. If you are a registered author of this item, you may also want to check the "citations" tab in your profile, as there may be some citations waiting for confirmation.

Please note that corrections may take a couple of weeks to filter through the various RePEc services.