COVID-19 Pandemic Initial Effects on the Idiosyncratic Risk in Latin America

Abstract

This work aims to estimate the idiosyncratic risk of Latin American economies and emerging economies using heteroscedastic conditional models to verify the impact of the Covid-19 pandemic on the risk associated with productive projects. The methodology used is based on the portfolio theory to estimate the idiosyncratic risk. The results highlight that Latin American economies are more susceptible to sanitary crises, such as the current pandemic, than emerging economies. The inability of emerging countries to generate the necessary savings to provide for their development imposes the need to attract resources for project financing and investment. Thus, determining the specific risk of Latin American countries is fundamental for international investors giving them another parameter when deciding on investment or financing on the continent. Originally, this work demonstrates how the sanitary crisis deriving from the Covid-19 pandemic affected the idiosyncratic or specific risk of Latin American economies using their capital market indicators. This study contributes to the assessment of Latin American economies specific risk or country risk at the beginning of the pandemic.

Determinantes del nivel de efectivo en un grupo de emisoras de la Bolsa Mexicana de Valores

“…Es importante señalar que, aunque la enfermedad ocasionada por el virus SARS-CoV-2 afectó a todos los países del mundo, sus manifestaciones fueron más significativas y perniciosas en los considerados emergentes (Cakmakli et al, 2020). Más aún, tales efectos nocivos se aprecian en mayor medida en las economías latinoamericanas que presentan una mayor predisposición y/o exposición a recibir choques originados en mercados extranjeros (De Salles, 2021). Finalmente, en relación con tema de investigación la evidencia empírica señala que durante la pandemia los administradores financieros optaron por incrementar las tenencias de efectivo como una medida para amortiguar la incertidumbre (Xiuhong et al, 2020;Tomohito e Lichiro, 2021;Hoang et al, 2022).…”

Tracking COVID-19 Decease Through Rolling Conditional Variance

“…In response, the World Health Organization (WHO) was forced to decree the pandemic in March 2001. As with the 1918 crisis, the one caused by COVID-19 has also triggered countless studies and investigations in the more diverse areas of knowledge (De Salles, 2021).…”

“…On the other hand, within the economic effects, the reorientation of public spending, the increase in resources on health and economic aid to vulnerable sectors, the decrease in fiscal income, and the corresponding fiscal deficit of the government stand out in addition to multiplier effects, economic and significant changes in the behavior pattern of aggregate consumption, to mention just a few aspects (Mackellar, 2007). The COVID-19 pandemic has directly affected social and economic life in practically all the world's countries, negatively affecting financial markets, economic agents' expectations through the money, exchange, credit, and capital markets and their corresponding effect on financing, saving, and investment (De Salles, 2021). The advance of the health ravages of the COVID-19 pandemic, particularly the number of deaths, decreases confidence in financial markets in the face of expectations of prolonged lockdowns and a slow recovery in economic growth (Daehler, Aizenman, & Jinjarak, 2021).…”

Characterising Crime Incidence in Mexico: A Hierarchical Linkage Clustering Analysis

“…The health crisis affected the global capital market's performance, causing losses of approximately 30% (Ali et al, 2020), with job losses, increased levels of poverty, damage to supply chains, even significant adverse effects on education and learning, among other manifestations of human behaviour (Ekinci, 2021). Although the COVID-19 pandemic affected all countries, its results were more significant in emerging economies (Cakmakli et al, 2020), especially in Latin America, because it was more susceptible to receiving shocks from abroad (De Salles, 2021).…”