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Stock market co-movement in Latin America and the US: evidence from a new approach

Author

Listed:
  • Puneet Vatsa
  • Hem Basnet
  • Frank Mixon

Abstract

Purpose - The purpose of this paper is to investigate the interlinkages among four major stock markets in Latin America, i.e., those in Argentina, Brazil, Chile, and Mexico, as well as their associations with the US stock market, which influences financial markets globally. Design/methodology/approach - Using the newly developed Hamilton filter methodology (Hamilton, 2018), the authors decompose each stock series to extract cyclical components. Findings - Results indicate that the US S&P 500 is weakly contemporaneously correlated with stock market indices in Brazil, Mexico and Argentina, whereas it also leads the latter by three months. As such, sufficient time is available for policymakers and investors to enhance their forecasts of the latter. Originality/value - Results indicate that the US S&P 500 is weakly contemporaneously correlated with stock market indices in Brazil, Mexico and Argentina, whereas it also leads the latter by three months. As such, sufficient time is available for policymakers and investors to enhance their forecasts of the latter.

Suggested Citation

  • Puneet Vatsa & Hem Basnet & Frank Mixon, 2021. "Stock market co-movement in Latin America and the US: evidence from a new approach," Journal of Financial Economic Policy, Emerald Group Publishing Limited, vol. 14(2), pages 162-171, May.
    • Handle: RePEc:eme:jfeppp:jfep-02-2021-0047
    DOI: 10.1108/JFEP-02-2021-0047
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    More about this item

    Keywords

    Financial markets; Financial economics; Hamilton filter; Time series econometrics; Stock market indices; C22; C58; G10;
    All these keywords.

    JEL classification:

    • C22 - Mathematical and Quantitative Methods - - Single Equation Models; Single Variables - - - Time-Series Models; Dynamic Quantile Regressions; Dynamic Treatment Effect Models; Diffusion Processes
    • C58 - Mathematical and Quantitative Methods - - Econometric Modeling - - - Financial Econometrics
    • G10 - Financial Economics - - General Financial Markets - - - General (includes Measurement and Data)

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