Latin American Stock Market Integration before and during the COVID-19 Pandemic

Javier Emmanuel Anguiano Pita

doi:10.4067/S0718-88702024000200003

Authors

Javier Emmanuel Anguiano Pita CONAHCYT-Universidad de Guadalajara

DOI:

https://doi.org/10.4067/S0718-88702024000200003

Keywords:

Stock market integration, TVP-VAR, asymmetric connectedness, COVID-19, Latin America

Abstract

This study analyzes the dynamics of integration processes between the stock markets of Argentina, Brazil, Chile, Colombia, Mexico, and Peru. To this end, a time-varying parameter vector autoregressive (TVP-VAR) model is employed, and asymmetric connectivity indices between markets are calculated. The study uses daily stock return series for the period from January 5, 2017 to February 28, 2023. The main findings show that: 1) integration levels between markets increased during the first year of the pandemic; 2) markets tend to be more integrated when experiencing losses; 3) Brazilian and Mexican markets play a dominant role in transmitting shocks to other markets; and, 4) uncertainty regarding the evolution of the pandemic had differentiated effects on integration levels between markets. The findings may be useful in guiding financing, investment, and regulatory decisions in Latin American stock markets.

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References

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