The Comovements in International Stock Markets: New Evidence from Latin American Emerging Countries
AbstractWe 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 InfoIf 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.
Bibliographic InfoPaper provided by Development and Policies Research Center (DEPOCEN), Vietnam in its series Working Papers with number 05.
Length: 28 pages
Date of creation: 2007
Date of revision:
Stock market comovements; Latin American emerging markets; Multivariate GARCH models; Structural breaks;
Other versions of this item:
- Mohamed El Hedi Arouri & Mondher Bellalah & Duc Khuong Nguyen, 2010. "The comovements in international stock markets: new evidence from Latin American emerging countries," Applied Economics Letters, Taylor & Francis Journals, vol. 17(13), pages 1323-1328.
- Mohamed El Hedi Arouri & Mondher Bellalah & Duc Khuong Nguyen, 2008. "The Comovements In International Stock Markets: New Evidence From Latin American Emerging Countries," Working Papers halshs-00202943, HAL.
- F37 - International Economics - - International Finance - - - International Finance Forecasting and Simulation: Models and Applications
- G15 - Financial Economics - - General Financial Markets - - - International Financial Markets
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.:
- 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.
- Geert Bekaert & Robert J. Hodrick & Xiaoyan Zhang, 2005.
"International Stock Return Comovements,"
NBER Working Papers
11906, National Bureau of Economic Research, Inc.
- Bekaert, Geert & Hodrick, Robert J & Zhang, Xiaoyan, 2006. "International Stock Return Comovements," CEPR Discussion Papers 5955, C.E.P.R. Discussion Papers.
- Bekaert, Geert & Hodrick, Robert J. & Zhang, Xiaoyan, 2005. "International Stock Return Comovements," Working Papers 06-3, University of Pennsylvania, Wharton School, Weiss Center.
- Bekaert, Geert & Hodrick, Robert J. & Zhang, Xiaoyan, 2008. "International stock return comovements," Working Paper Series 0931, European Central Bank.
- 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.
- Tim Bollerslev, 1986.
"Generalized autoregressive conditional heteroskedasticity,"
EERI Research Paper Series
EERI RP 1986/01, Economics and Econometrics Research Institute (EERI), Brussels.
- Bollerslev, Tim, 1986. "Generalized autoregressive conditional heteroskedasticity," Journal of Econometrics, Elsevier, vol. 31(3), pages 307-327, April.
- Campbell R. Harvey, 1994.
"Predictable Risk and Returns in Emerging Markets,"
NBER Working Papers
4621, National Bureau of Economic Research, Inc.
- Bekaert, Geert & Harvey, Campbell R, 1995.
" Time-Varying World Market Integration,"
Journal of Finance,
American Finance Association, vol. 50(2), pages 403-44, June.
- 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.
- Richards, Anthony J., 1995. "Comovements in national stock market returns: Evidence of predictability, but not cointegration," Journal of Monetary Economics, Elsevier, vol. 36(3), pages 631-654, December.
- Andrea Beltratti & Claudio Morana, 2006.
"Comovements in International Stock Markets,"
ICER Working Papers
3-2006, ICER - International Centre for Economic Research.
- Morana, Claudio & Beltratti, Andrea, 2008. "Comovements in international stock markets," Journal of International Financial Markets, Institutions and Money, Elsevier, vol. 18(1), pages 31-45, February.
- BAI, Jushan & PERRON, Pierre, 1998.
"Computation and Analysis of Multiple Structural-Change Models,"
Cahiers de recherche
9807, Universite de Montreal, Departement de sciences economiques.
- Jushan Bai & Pierre Perron, 2003. "Computation and analysis of multiple structural change models," Journal of Applied Econometrics, John Wiley & Sons, Ltd., vol. 18(1), pages 1-22.
- 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.
- 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.
- 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.
- Harry Markowitz, 1952. "Portfolio Selection," Journal of Finance, American Finance Association, vol. 7(1), pages 77-91, 03.
- Sims, Christopher A, 1980. "Macroeconomics and Reality," Econometrica, Econometric Society, vol. 48(1), pages 1-48, January.
- Geert Bekaert & Campbell R. Harvey, 1997.
"Foreign Speculators and Emerging Equity Markets,"
NBER Working Papers
6312, National Bureau of Economic Research, Inc.
- Perron, P. & Bai, J., 1995.
"Estimating and Testing Linear Models with Multiple Structural Changes,"
Cahiers de recherche
9552, Centre interuniversitaire de recherche en économie quantitative, CIREQ.
- Jushan Bai & Pierre Perron, 1998. "Estimating and Testing Linear Models with Multiple Structural Changes," Econometrica, Econometric Society, vol. 66(1), pages 47-78, January.
- 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.
- 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.
- Kee-Hong Bae & G. Andrew Karolyi & René M. Stulz, 2003.
"A New Approach to Measuring Financial Contagion,"
Review of Financial Studies,
Society for Financial Studies, vol. 16(3), pages 717-763, July.
- 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.
- 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.
- 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.
- Bekaert, Geert & Harvey, Campbell R., 1997.
"Emerging equity market volatility,"
Journal of Financial Economics,
Elsevier, vol. 43(1), pages 29-77, January.
- 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.
- 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.
- Vihang R Errunza, 1977. "Gains from Portfolio Diversification into Less Developed Countries’ Securities," Journal of International Business Studies, Palgrave Macmillan, vol. 8(2), pages 83-100, June.
- 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.
- 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.
- repec:wyi:journl:002183 is not listed on IDEAS
- 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.
For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: (Doan Quang Hung).
If references are entirely missing, you can add them using this form.