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Chapter 2 Nonlinear Stock Market Links between Mexico and the World

In: Nonlinear Modeling of Economic and Financial Time-Series

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  • Mohamed El Hedi Arouri
  • Fredj Jawadi

Abstract

Purpose – This chapter aims to investigate the stock market comovements between Mexico and the world capital market using nonlinear modeling tools. Methodology/approach – We apply recent nonlinear cointegration and nonlinear error correction models (NECMs) to investigate the comovements between stock prices over the recent period. Findings – While the previous literature only highlights some evidence of time-varying comovements, our chapter aims to specify the mechanism characterizing the comovement process through the comparison of two nonlinear error correction models (NECMs). It shows a nonlinear relationship between stock prices that are activated per regime. Originality – Studying the integration hypothesis between stock markets over the recent financial crisis, our findings highlight strong evidence of significant comovements that explain the global collapse of stock markets in 2008–2009.

Suggested Citation

  • Mohamed El Hedi Arouri & Fredj Jawadi, 2010. "Chapter 2 Nonlinear Stock Market Links between Mexico and the World," International Symposia in Economic Theory and Econometrics, in: Nonlinear Modeling of Economic and Financial Time-Series, pages 29-39, Emerald Group Publishing Limited.
    • Handle: RePEc:eme:isetez:s1571-0386(2010)0000020007
    DOI: 10.1108/S1571-0386(2010)0000020007
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    Keywords

    stock market comovements;

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