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The Comovements In International Stock Markets: New Evidence From Latin American Emerging Countries

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  • Mohamed El Hedi Arouri

    ()
    (LEO - Laboratoire d'économie d'Orleans - CNRS : UMR6221 - Université d'Orléans, EconomiX - CNRS : UMR7166 - Université de Paris X - Nanterre)

  • Mondher Bellalah

    (THEMA - Théorie économique, modélisation et applications - CNRS : UMR8184 - Université de Cergy Pontoise)

  • Duc Khuong Nguyen

    (CERAG - Centre d'études et de recherches appliquées à la gestion - CNRS : UMR5820 - Université Pierre Mendès-France - Grenoble II)

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.

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Bibliographic Info

Paper provided by HAL in its series Working Papers with number halshs-00202943.

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Date of creation: 08 Jan 2008
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Handle: RePEc:hal:wpaper:halshs-00202943

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Related research

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

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Cited by:
  1. 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.
  2. 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.
  3. repec:wyi:journl:002183 is not listed on IDEAS

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