Faculty Scholarship 1994 - Present
Test of the Co-Movements of Latin American Equity Markets
Although the co-movements of the developed equity markets have been studied extensively in the finance literature, the co-movements of the emerging equity markets with each other and with the developed equity markets have not been studied sufficiently. In this paper, we study the co-movements of the four largest Latin American emerging equity markets (the Brazilian, Mexican, Chilean, and Argentinean equity markets) with each other and with four of the world's five largest developed equity markets (the U.S., Japanese, U.K., and German equity markets). Our findings show that the average correlation coefficients of the four Latin equity markets have been increasing and the benefits of international diversification with these four Latin equity markets have been decreasing. Our findings also indicate that there is significant inter-temporal instability in the long-term co-movements of the four Latin equity markets.