Faculty Scholarship 1994 - Present
Linkages Between MERCOSUR Stock Markets in South America
Mercosur is a common market in South America. Argentina, Brazil, and Chile are the three largest economies in Mercosur. Mexico can also become a member of Mercosur in the near future. Learning the financial characteristics of Mercosur is important for U. S. investors. This paper studies the linkages between the Argentine, Brazilian, and Chilean stock markets by using the rolling correlation analysis and Granger causality techniques with data for the January 1997-May 2005 period. Our findings indicate that correlation between the three stock markets has been decreasing and diversification benefits with these markets have been increasing. We also find that the Argentine stock market is not weak-form efficient and that Brazilian stock market returns can be used to predict Argentine stock market returns.