Title

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

Document Type

Article

Publication Date

1-1-2021

Publication Title

Journal of Financial Economic Policy

DOI

10.1108/JFEP-02-2021-0047

Keywords

Financial economics, Financial markets, Hamilton filter, Stock market indices, Time series econometrics

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.

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