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Latin American stock market dynamics and comovement

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  • Simeon Coleman
  • Vitor Leone
  • Otavio R. de Medeiros

Abstract

With the economic relevance of the relationships among emerging and frontier equity markets becoming increasingly significant, this paper investigates comovement among returns from six Latin American stock markets (Mexico [BMV], Brazil [BOVESPA], Chile [IPSA], Peru [IGBVL], Argentina [MERVAL], and Venezuela [IBVC]) and also with the U.S. S&P 500 Composite index. In part, we employ principal component analyses, to account for the maximum portion of the variance present in the returns by examining rolling windows with 8‐, 6‐, 4‐, 3‐, 2‐, and 1‐year periods. We also investigate the incidence of structural breaks and comovement, aiming to uncover the dynamics in comovements among these markets. We find evidence of high comovement among the Latin American markets, and also with the U.S. markets. Venezuela and Mexico's equity markets are at the extremes. However, our results do not corroborate findings of clear evidence, reported in previous studies, of the United States having a leading role in the region.

Suggested Citation

  • Simeon Coleman & Vitor Leone & Otavio R. de Medeiros, 2019. "Latin American stock market dynamics and comovement," International Journal of Finance & Economics, John Wiley & Sons, Ltd., vol. 24(3), pages 1109-1129, July.
    • Handle: RePEc:wly:ijfiec:v:24:y:2019:i:3:p:1109-1129
    DOI: 10.1002/ijfe.1708
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    Cited by:

    1. Jamel Jouini, 2023. "New evidence on financial integration in Latin America," Economics Bulletin, AccessEcon, vol. 43(4), pages 1802-1815.
    2. Imran Yousaf & Shoaib Ali & Wing-Keung Wong, 2020. "Return and Volatility Transmission between World-Leading and Latin American Stock Markets: Portfolio Implications," JRFM, MDPI, vol. 13(7), pages 1-19, July.
    3. Hsu, Ching-Chi & Chien, FengSheng, 2022. "The study of co-movement risk in the context of the Belt and Road Initiative," International Review of Economics & Finance, Elsevier, vol. 80(C), pages 1130-1152.
    4. Asafo-Adjei, Emmanuel & Tiwari, Aviral Kumar & Abakah, Emmanuel Joel Aikins & Lee, Chi-Chuan, 2024. "Risk synchronization in Australia stock market: A sector analysis," International Review of Economics & Finance, Elsevier, vol. 93(PA), pages 582-610.
    5. Hsu, Ching-Chi & Chen, Miao-Ling, 2021. "Currency momentum strategies based on the Chinese Yuan: Timing of foreign exchange volatility," Journal of International Financial Markets, Institutions and Money, Elsevier, vol. 72(C).

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