International Stock Market Linkages and Spillovers: Evidence from Three Latin American Countries

ABSTRACT

Using a multivariate exponential generalized autoregressive conditionally heteroscedastic (M-EGARCH) model, this study examines price and volatility spillovers and response asymmetries between the equity markets of the United States and Brazil, Chile and Mexico. Our results vary depending on the openness of the country in terms of international trade. Evidence indicates that there are price and volatility spillovers from the United States to Mexico and Chile and but not to Brazil. In addition, our results indicate response asymmetries for Mexico and Chile, suggesting that the Mexican and Chilean markets are more sensitive to negative innovations originating from other markets than to positive innovations.

RESUMEN. Este estudio examina contagios de precio y volatilidad, y respuestas asimétricas entre los mercados de capital de Estados Unidos y Brasil, Chile y México, fundándose en un modelo exponencial generalizado multivariado, con un condicionante autoregresivo heteroscedástico (M-EGARCH). Los resultados obtenidos varían, dependiente del nivel de apertura de un país en lo que concierne al comercio internacional. Las pruebas indican que existen contagios de precio y volatilidades desde los Estados Unidos hacia México y Chile, pero no hacia Brasil. Además, los resultados también indican asimetrías de respuesta para México y Chile, sugiriendo que estos dos mercados son más sensibles a las innovaciones negativas que se originan en otros mercados, que a las innovaciones positivas.

RESUMO. Usando um modelo condicionalmente heterocedástico, autoregressivo, generalizado, exponencial e multivariado (M-EGARCH), este estudo examina contágios de preços e volatilidade, e assimetrias de resposta entre mercados de ações dos EUA e Brasil, Chile e México. Nossos resultados variam, dependendo da abertura do país em termos de comércio internacional. Os dados indicam que existem contágiosde preço e volatilidade dos EUA para o México e Chile, mas não para o Brasil. Além disso, nossos resultados indicam assimetrias de resposta para o México e Chile, sugerindo que estes mercados são mais sensíveis a inovações negativas originárias de outros mercados do que a inovações positivas.     

Co-Movements of Latin American Equity Markets Before and After September 11, 2001

ABSTRACT

Empirical studies show that correlation between national equity markets tends to increase and the benefits of global portfolio diversification tend to decrease after events of global importance. A sufficiently long time period has passed since the September 11, 2001 terrorist attacks on the U.S. This time period provides a valuable opportunity to study if these events have changed the long-term co-movement patterns of international equity markets. We test this hypothesis using correlation analysis, principal components analysis and Granger causality statistical techniques by comparing the co-movement patterns of seven Latin American equity markets and the U.S. and Canadian equity markets during the five-year period before September 11 and during the five-year period afterward. Despite the findings of several previous studies on the world's other equity markets, our findings in this study indicate that correlation between the equity markets on the American continent decreased and the benefits of global portfolio diversification in the region increased after September 11, 2001.

RESUMEN. Los estudios empíricos muestran que la correlación entre los mercados de valores nacionales tiende a aumentar, mientras que las ventajas de la diversificación de la cartera global tienden a disminuir después de importantes eventos globales. Ya ha transcurrido suficiente tiempo desde el ataque terrorista del 11 de septiembre de 2001 en los Estados Unidos, Esto brinda una valiosa oportunidad para estudiar si estos eventos han cambiado los patrones de comovimiento a largo plazo de los mercados de valores nacionales. Ponemos a prueba esta hipótesis, los principales componentes del análisis, y las técnicas de la estadística causal comparadas por los patrones de comovimiento en los siete mercados de valores latinoamericanos, y los de los EE.UU y Canadá, durante el período quinquenal anterior al 11 de septiembre y durante el período quinquenal posterior a esa fecha. A pesar de los hallazgos que obtuvieron diversos estudios anteriores sobre los mercados de valores mundiales, nuestros hallazgos en este estudio indican que la correlación entre los mercados de valores en el continente americano ha bajado, y que los beneficios de la diversificación de la cartera global aumentaron en la región después del 11 de septiembre de 2001.

RESUMO. Estudos empíricos mostram que a correlação entre os mercados de ações nacionais tendem a aumentar e os benefícios da diversificação do portfólio global tendem a decrescer após acontecimentos de importância mundial. Um período bem longo transcorreu desde os ataques terroristas de 11 de setembro de 2001, nos Estados Unidos. Isto propicia uma oportunidade valiosa para analisar se estes acontecimentos mudaram os padrões de cointegração de longo prazo dos mercados de ações nacionais. Testamos esta hipótese através da análise de correlação, da análise dos componentes principais e das técnicas estatísticas de causalidade de Granger, comparando os padrões de cointegração de sete mercados de ações da América Latina e os mercados de ações americano e canadense, durante o período de cinco anos antes e depois do 11 de setembro. Apesar da descoberta de vários estudos anteriores sobre os demais mercados de ações do mundo, nossas descobertas neste trabalho indicam que a correlação entre os mercados de ações do continente americano decresceu e os benefícios de diversificação do portfólio mundial, na região, aumentaram, após o 11 de setembro de 2001.     

Internationalization Strategies Underlying the Performance of Foreign Banks in Latin American Markets

In this article, we evaluate the internationalization strategies underlying the performance of foreign banks in Latin American countries. Based on a multiple case study, we investigated the organizational paths in the study countries, the market segments served and performance. Our results show that it is possible to consider both economic and behavioral perspectives in this kind of analysis in order to map the entry modes and features of large banks in the study countries. We observed that some banks may have similar strategies in local markets, with particular emphasis on local adaptation, while others seem to promote the development of previous corporate characteristics.     

Mean-Reversion and Long Memory in the Stock Market Indexes of Some Latin American Countries

ABSTRACT

In this paper we examine the mean-reversion and long-memory properties in the stock market indexes of some Latin American countries by means of fractional integration. In doing so, we allow for a much richer degree of flexibility in the dynamic behaviour of the series not achieved when using the classical representations based on I(0) or I(1) processes. We use a semiparametric local Whittle estimator based on the frequency domain. The results show that the order of integration of the series is higher than 1 for Argentina, Venezuela and Colombia and is around 1 or slightly higher for Mexico. The results also show that the unit root cannot be rejected for the case of Brazil. Splitting the samples around the periods of crisis, we find long-memory stock market returns in the pre-crisis period for all countries except Brazil. However, using post-crisis data, the unit-root cannot be rejected, which might be consistent with the Efficient Market Hypothesis. A notable exception is the case of Colombia, where long memory is also found in the returns for the post-crisis period.

RESUMEN. En este estudio examinamos las propiedades de la reversión media y de la memoria prolongada en los índices del mercado bursátil en algunos países latino-americanos, a través de la integración fraccional. Utilizando este método, permitimos la ocurrencia de una flexibilidad mucho más rica en el comportamiento dinámico de las series, que no se puede lograr con el uso de las representaciones clásicas, basadas en los procesos I(0) o I(1). Utilizamos un estimador Whittle local semiparamétrico, fundamentado en el dominio de la frecuencia. Los resultados obtenidos muestran que el orden de integración de la serie es mayor a 1 para Argentina, Venezuela y Colombia, y alrededor de o poco más de 1 para México. Además, los resultados también demuestran que, en el caso brasileño, no puede rechazarse la unidad raíz. Al dividir las muestras alrededor de los períodos de crisis, descubrimos que el mercado bursátil con memoria prolongada vuelve a aparecer en el período pre crisis en todos los países menor Brasil. Sin embargo, si usamos los datos post crisis no podemos rechazar la unidad raíz ya que la misma puede ser coherente con la Hipótesis del Mercado Eficiente. Una excepción notable esel caso de Colombia, donde la memoria prolongada también se encuentra en los retornos para el período post crisis.

RESUMO. Neste artigo examinamos as propriedades de reverãs média e memória longa nos índices de mercados de aç[otilde]es de alguns países latino-americanos por meio da integração fracionária. Com isto, permitimos um grau de flexibilidade bem maior no comportamento dinâmico da série, não obtida quando se usam representaç[otilde]es clássicas baseadas nos processos I(0) e I(1). Empregamos um estimador Whittle local semiparamétrico baseado no domínio da freqüência. Os resultados mostram que a ordem de integração das série é maior que 1 para a Argentina, Venezuela e Colômbia e em torno de 1 ou ligeiramente maior para o México. Os resultados também mostram que a raiz unitária não pode ser rejeitada para o caso do Brasil. Dividindo-se as amostras em torno dos períodos de crise, encontramos retornos de mercado de aç[otilde]es de memória longa no período pré-crise para todos os países, exceto o Brasil. Entretanto, usando dados pós-crise, a raiz unitária não pode ser rejeitada, o que poderia ser compatível com a Hipótese do Mercado Eficiente. Uma exceção notável é o caso da Colômbia, onde a memória longa também se encontra nos retornos para o período pós-crise.     

Risk,Return and Performance of Latin America's Equity Markets, 1975-1995

Abstract

This paper examines the investment performance of Latin American equity markets from 1975 through mid-1995. Latin American equity markets have been among the most volatile in the world over the past twenty years. However, their low correlation with other markets has provided diversification benefits. These markets have low liquidity and are concentrated in a few securities. The currencies of Latin American markets have depreciated dramatically against the U.S. dollar. Nevertheless, the investment performance of these markets has been impressive: Their compound returns in U.S. dollar terms have exceeded those of the U.S. and of emerging markets in other regions of the globe.

Este trabajo examina el desempeño de los mercados accionarios latinoamericanos desde diciembre de 1975 hasta junio de 1995. Estos mercados han tenido una de las volatilidades mas altas del mundo durante los veinte años examinados, sin emhargo sus bajas correlaciones con otros mercados han resultado en beneficios de diversificatión. En cada mercado el valor de la unidad monetaria local ha caido dramáticamente con respecto al dólar de Estados Unidos y también han existido problemas de liquidez. A pesar de ésto, el desempeño de los mercados accionarios en la región ha sido impresionante y sus rendimientos compuestos han superado los de los mercados de Estados Unidos y otras economías emergentes.

Esse trabalho examina o desempenho do investimento no mercado de aç[otilde]es da America Latina entre 1975 até os meados de 1995. Os mercados de aç[otilde]es latino-americanos encontram se entre os mais voláteis do mundo nos últimos 20 anos. Entretanto, a sua baixa correlação com outros mercados apresentou beneficios para a diversificação. Esses mercados apresentam baixa liquidez e são concentrados em umas poucas aç[otilde]es. As moedas dos mercados Latinoamericanos depreciaram dramaticamente contra o dólar americano. Entretanto, o desempenho de investimentos nesses mercados tem sido impressionantes: o retorno composto em dólares americanos excederam os dos Estados Unidos e os dos mercados emergentes em outras partes do mundo.     

Latin American retail: where modernity blends with tradition

Latin America's retail landscape has changed dramatically over the last 20 years. Attracted by deregulation and a sizable and growing market, modern retailers arrived looking for the next El Dorado. But signs of maturity appeared much before expected. Traditional retailers modernized their offer, while keeping their appeal to the emerging consumers. While chain retail has concentrated earlier than expected – and faster by the hand of crisis that are usual in emerging markets –, local chains have developed formats which add modernity to their understanding of their customers' base. By providing better access through convenience and credit to a broader range that even includes affordable design and quality, local chains are showing the way to the growing mass customers that form Latin America's new emerging middle class. And leveraging on this customer understanding, they are redefining concepts like convenience and crossing borders to grab the opportunity of the new emerging consumers. This article covers the evolution of retailing in Latin America over the past two decades, and provides insights on the segment that has brought the most significant growth: emerging consumers.     

Economic integration across Latin America: Evidence from labour markets, 1990–2013

Combining macroeconomic and microeconomic data and three indicators of international market integration, this paper assesses the degree to which Latin American labour markets are integrated. The results suggest that relative to East Asia, Latin American labour markets are somewhat more integrated, but considerable differences across countries persist. In addition, the evidence indicates that the degree of labour market integration across Latin American borders is significantly less than that of labour markets within the United States in two of the three indicators. These differences may suggest opportunities for efficiency gains from further labour market integration.     

Stock Price Response to Earnings Announcements: Evidence From the Nigerian Stock Market

The author examines the stock market reaction to annual earnings information releases using data for a sample of firms on the Nigerian Stock Exchange. Using the event study method, the author found that the magnitude of the cumulative abnormal returns is dominated by significant reactions 20 days before the earnings release date, which suggests that a portion of the market reaction may be due to private acquisition and, possibly, abuse of information by insiders. The persistent downward drift of the cumulative abnormal returns, 20 days after the announcement, is inconsistent with the efficient markets hypothesis.     

The Price of Risk on the African Frontier Stock Markets

The Capital Asset Pricing Model (CAPM), and the Fama-French and Carhart models have been widely applied in the developed and most emerging markets; however, there is scant evidence of the viability of the models on the African Frontier Stock Markets (AFSMs). This study examines the viability of the models for a sample that pools securities across nine AFSMs, and whether or not the risk factors of these models command risk premium on the AFSMs. The paper provides evidence of the existence of the size, value and momentum effects on the AFSMs. In addition, the models only partly capture the returns to size and book-to-market sorted portfolios on the AFSMs. Also, the risk factors of these models generally, command marginally significant premium on the AFSMs. Caution should in general be exercised when applying these models on the AFSMs.     

The Role of Financial Ratios in the Variance of Stock Trading Volume in Emerging Stock Markets

The study used quarterly panel data of 6 years from 2010 to 2015 of all companies listed on both Vietnamese stock markets including the Ho Chi Minh City Stock Exchange and Ha Noi Stock Exchange, and on three leading industries consisting of insurance-banking, foodstuff, and real estate to explore the relationship among four key financial ratios and stock trading volume. Two models, fixed effects model (FEM) and random effects model (REM), with robust standard errors, were applied for this study. The key findings showed that earnings before tax on sales, debt on owner’s equity, and owner’s equity on total assets significantly influenced trading volume.     

股票市场周日历效应传导关系研究

以上证综指、深证成指、恒生指数、日经225指数四种指数为研究对象,实证研究四个股市的周日历效应及其传导关系。研究发现,上证综指在一周中有三天存在周日历效应,周二负效应和周三、周五正效应;深证成指在周三和周五两天存在正效应;恒生指数和日经225指数则分别在周五和周一存在正效应和负效应。上证综指的周三、周五正效应与深证成指的周三、周五正效应互相传导;上证综指与恒生指数的周五正效应互相传导;深证成指与恒生指数的周五正效应亦互相传导;日经225指数与其他三种指数的周日历效应却不存在传导关系。     

It Is Time to Reexamine the Role of Stock Markets in Developing Economies

Although the many perceived benefits of a stock market may have led to their rapid formation and development aspirations across economies, emerging findings that stock markets may not be as useful as previously thought, even a detraction in the case of some developing economies, raises the question of how practical stock markets may be in different situations. In light of the foregoing and using Fiji as an example, this study argues that it is indeed time to reexamine the role of stock markets in developing economies with a view to restructuring the financial system for improved efficiency and effectiveness.     

Differentiation strategies in emerging markets: The case of Latin American agribusinesses

This study furthers the research agenda on Porter's generic strategies by exploring their implementation by firms that suffer from under representation in the literature. It focuses on agribusinesses based in emerging markets that specialize in high value added products. Relying on information collected through interviews, and a survey with 66 agribusinesses based in eight countries of Latin America, it examines the factors that distinguish firms implementing a differentiation strategy (DS). The findings provide interesting insights for scholars and practitioners alike, illustrating the strategic initiatives that DS firms use to ensure they command higher than average prices.     

Dynamics of Stock Prices and Exchange Rates Relationship: Evidence From Five Sub-Saharan African Financial Markets

This article examines the dynamic relationship between stock prices and exchange rates for five Sub-Saharan African financial markets: Ghana, Kenya, Mauritius, Nigeria and South Africa. It uses weekly data, covering the floating exchange rate regime from January 14, 2000, to December 31, 2009, and applies both the Vector Autoregression and the Dynamic Conditional Correlation models. Results from the Vector Autoregression model suggest no evidence of cointegration between stock prices and real exchange rates for all the five countries in the sample. Results from the dynamic conditional correlation show that the correlation coefficients are not constant for the period under study, and the estimates largely show a negative time-varying correlation for all the countries except Ghana that indicates a positive correlation.     

Volatility Transmission in Asian Bond Markets: Tests of Portfolio Diversification

The 1997 Asian crisis illustrated the need to develop local bond markets to reduce vulnerabilities to future mismatches in currency and maturity. This article examines a regional initiative – the Pan-Asian Bond Index Fund – and tests the implications for portfolio diversification. Intra- and inter-regional transmission of bond market volatilities between Hong Kong, Singapore and South Korea and from the United States and Japan is investigated. The results show that since Hong Kong and Singapore are highly integrated into global capital markets, the prospects of diversification of investment become undermined. The study provides evidence to assist policy makers in designing bond-index funds as a strategy for portfolio diversification to promote regional bond markets.     

中印两国纺织品服装在欧美市场的竞争关系研究

基于纺织品服装细分到三位数的进出口数据,利用价格贸易条件、竞争互补指数、竞争压力指数、显示性对称比较优势指数和出口产品相似性指数对中印两国纺织品服装在欧美市场的贸易竞争关系进行分析,发现中国纺织品服装在贸易量上具有显著优势,但在贸易条件和比较优势上则弱于印度;同时两国纺织品服装在欧美市场具有较高的出口相似性,中国对印度的竞争压力显著高于印度对中国的竞争压力。随后对两国纺织服装业的优劣势进行分析,并对如何更好地促进中国纺织服装业的发展提出了对策建议。     

Effects of Mergers and Acquisitions on Shareholder Wealth: Event Study for Latin American Airlines

This study analyzes the effect of changes in corporate control on the way shareholders benefit from the announcements of selling and buying airlines, thus contributing to the literature on mergers and acquisitions (M&As) in emerging markets. Using a methodology of event study, including GARCH and OLS models, we find evidence that some selling companies obtain abnormal returns that are statistically significant after the announcement of the M&A. However, when the merger is not strategic, the companies present statistically significant negative abnormal returns. The results are not conclusive when analyzing the effect on the value of the buying companies.     

Latin American franchise internationalization: The impact of institutional environment

We analyze the internationalization of Brazilian franchise chains in Latin America. A total of 119 observations verify international commitment in each country in relation to institutional environment factors and how they are moderated by chain size and industry. The results show that despite all institutional aspects having a significant effect, their explanatory power depends on chain size. Larger franchise chains usually choose countries with better institutional aspects in terms of contract compliance and business freedom, even if the efficiency of business conditions in these countries are not the best in Latin America. In this study, were used public data from international organizations that report on the ease of doing business, level of corruption, political risk, and legal regulations. Specifically, it contributes by using institutional theory in franchising in order to understand the process of chain internationalization originating from emerging markets. Our results, in part, contradict the idea that the origin disadvantage is always an advantage of internationalization.     

The impact of internationalization degree on cash levels: Evidence from Latin America

Although cash management has been extensively studied, the cash policies of multinational corporations (MNCs) outside of the U.S. market have been underexplored. We fill this gap in the literature by comparing the cash policies of MNCs to those of non-MNCs in a Latin American setting (Argentina, Brazil, Chile, Colombia, Mexico and Peru). Using different proxies for multinationality, we find evidence that the cash holdings of multilatinas are significantly higher than those of their domestic counterparts. Overall, given that foreign markets may offer the best investment opportunities for many MNCs, our results are consistent with the argument that multilatinas maintain higher cash levels to take advantage of the greater growth opportunities abroad. We contribute to the literature on cash management and international business by expanding knowledge regarding the efforts of MNCs in emerging markets. Our results hold following a series of robustness checks and endogeneity concerns.     

Performance and Competitiveness of Latin American Cities: The Human Capital Case

Abstract

Besides the human capital, elements that make Latin American cities competitive include, for instance, their culture or financial maturity. However, the most important challenge for Latin American cities to succeed is how to manage all these variables. The purpose of this study is to identify the contribution of human capital and its relationships and impacts on the performance of Latin American cities. This quantitative, non-experimental, explanatory, correlational, and cross-sectional study observes factors that increase city competitiveness and develop their relationships. The study is based on the Economist Intelligence Unit database of 2012, in which 120 cities were evaluated, particularly contrasting Latin American cities with the top cities in the world and their characteristics. Urban competitiveness in Latin American cities can be predicted partially on the presence of Human Capital. In some instances, we found positive relationships between human capital and the characteristics considered in a city’s performance.