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

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.

Citation

Vatsa, P., Basnet, H. and Mixon, F. (2022), "Stock market co-movement in Latin America and the US: evidence from a new approach", Journal of Financial Economic Policy, Vol. 14 No. 2, pp. 162-171. https://doi.org/10.1108/JFEP-02-2021-0047