Causality and Cointegration in Stock Markets: The Case of Latin America
This paper analyzes causality and cointegration relationships among stock markets for Latin America and the United States. Within a simple framework causality and cointegration is tested for Argentina, Brazil, Chile, Colombia, Mexico, Peru, Venezuela and the US. We found no evidence of cointegration among these stock markets but short-run causality could not be rejected. Furthermore, we use impulse response functions to analyze the relative impact of shocks in the US stock index (Dow Jones) on Latin American indexes. Evidence suggests that the responses differ significantly among these countries. These findings imply that there are valuable opportunities to international investors from diversifying in US and Latin American stocks.
|Date of creation:||Dec 2002|
|Date of revision:|
|Publication status:||Published in Brazilian journal of Business Economics, Vol. 3, no. 2, (-Aug 2003).|
|Contact details of provider:|| Web page: http://www.bcb.gov.br/?english|
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- Cheung, Yin-Wong & Lai, Kon S, 1993. "Finite-Sample Sizes of Johansen's Likelihood Ration Tests for Conintegration," Oxford Bulletin of Economics and Statistics, Department of Economics, University of Oxford, vol. 55(3), pages 313-28, August.
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