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Stock return comovements and integration within the Latin American integrated market

  • Carlos Castro

    ()

  • Nini Johana Marin

    ()

Abstract: Financial integration has been pursued aggressively across the globe in the last ?fty years; however, there is no conclusive evidence on the diversi?cation gains (or losses) of such e?orts. These gains (or losses) are related to the degree of comovements and synchronization among increasingly integrated global markets. We quantify the degree of comovements within the integrated Latin American market (MILA). We use dynamic correlation models to quantify comovements across securities as well as a direct integration measure. Our results show an increase in comovements when we look at the country indexes, however, the increase in the trend when we look at the country indexes, however, the increase in the trend grated market in the region. On the other hand, when we look at sector indexes and an integration measure, we ?nd a decreased in comovements among a representative sample of securities form the integrated market.

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Paper provided by UNIVERSIDAD DEL ROSARIO in its series BORRADORES DE INVESTIGACIÓN with number 011041.

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Length: 22
Date of creation: 01 Apr 2014
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Handle: RePEc:col:000091:011041
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  1. Juliana Caicedo-llano & Catherine Bruneau, 2009. "Co-movements of international equity markets: a large-scale factor model approach," Economics Bulletin, AccessEcon, vol. 29(2), pages 1466-1482.
  2. Sheppard, Kevin & Cappiello, Lorenzo & Engle, Robert F., 2003. "Asymmetric dynamics in the correlations of global equity and bond returns," Working Paper Series 0204, European Central Bank.
  3. Massimiliano Caporin & Michael McAleer, 2013. "Ten Things You Should Know About DCC," Working Papers in Economics 13/16, University of Canterbury, Department of Economics and Finance.
  4. Massimo Guidolin & Allan Timmermann, 2008. "International asset allocation under regime switching, skew, and kurtosis preferences," Review of Financial Studies, Society for Financial Studies, vol. 21(2), pages 889-935, April.
  5. Geert Bekaert & Robert J. Hodrick & Xiaoyan Zhang, 2009. "International Stock Return Comovements," Journal of Finance, American Finance Association, vol. 64(6), pages 2591-2626, December.
  6. Massimiliano Caporin & Michael McAleer, 2013. "Ten Things you should know about DCC," Tinbergen Institute Discussion Papers 13-048/III, Tinbergen Institute.
  7. Barras, L. & Isakov, D., 2001. "How to Diversify Internationally? A Comparison of Conditional and Unconditional Asset Allocation Methods," Papers 2001.07, Ecole des Hautes Etudes Commerciales, Universite de Geneve-.
  8. Manolis Kavussanos & Stelios Marcoulis & Angelos Arkoulis, 2002. "Macroeconomic factors and international industry returns," Applied Financial Economics, Taylor & Francis Journals, vol. 12(12), pages 923-931.
  9. Chelley-Steeley, Patricia L., 2005. "Modeling equity market integration using smooth transition analysis: A study of Eastern European stock markets," Journal of International Money and Finance, Elsevier, vol. 24(5), pages 818-831, September.
  10. Sanjiv Ranjan Das & Raman Uppal, 2004. "Systemic Risk and International Portfolio Choice," Journal of Finance, American Finance Association, vol. 59(6), pages 2809-2834, December.
  11. Andrew Ang & Geert Bekaert, 2002. "International Asset Allocation With Regime Shifts," Review of Financial Studies, Society for Financial Studies, vol. 15(4), pages 1137-1187.
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