Nonlinear Error Correction Models between Latin American Stock Markets and the United States Stock Market

Authors

  • Arturo Lorenzo Valdés Instituto Tecnológico y de Estudios Superiores de Monterrey, Campus Ciudad de México image/svg+xml

Keywords:

cointegration, stock returns, nonlinear dynamics, SETAR models, Latin America

Abstract

The intention of the present work is to evaluate long-run relations in the stock markets of six Latin American countries (Argentina, Brazil, Chile, Colombia, Mexico and Peru) and the United States stock market, by means of a model in which a cointegration relation exists between the principals prices stock indexes but allowing that the movements towards the long-run equilibrium only happen in some periods. For the previous thing threshold autoregressive models are considered. The idea is that the movements towards the long-run equilibrium need not occur every period but in a specific regime. We find that the specification is better in nonlinear than linear models and the cointegration relation only appears in four of the six analyzed Latin American countries.

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Author Biography

Arturo Lorenzo Valdés, Instituto Tecnológico y de Estudios Superiores de Monterrey, Campus Ciudad de México

Profesor del Departamento de Contabilidad y Finanzas del Instituto Tecnológico y de Estudios Superiores de Monterrey, México D.F., México.

References

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Published

2006-04-30

How to Cite

Valdés, A. L. (2006). Nonlinear Error Correction Models between Latin American Stock Markets and the United States Stock Market. Economic Analysis Review, 21(1), 117–129. Retrieved from https://www.rae-ear.org/index.php/rae/article/view/56

Issue

Vol. 21 No. 1 (2006)

Section

Articles

License

Copyright (c) 2006 Arturo Lorenzo Valdés

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