Macroeconomic shocks and the co-movement of stock returns in Latin America

Identifying bubbles in Latin American equity markets: Phillips-Perron-based tests and linkages

“…The strong linkages that we find can be explained by common macroeconomic shocks across these countries. This is in line with Araújo (2009), who finds that for Latin America, cross-country co-movements in stock returns can be the result of macroeconomic shocks. Clustering of equity markets can as well be a feasible explanation (see, e.g., Mendes et al, 2007).…”

Macroeconomic Determinants of the Stock Market Index for a Major Latin American Country and Policy Implications

“…For Argentina, the VAR estimation reveals that the stock market index is positively influenced by the MSCI global Business and Economic Research ISSN 2162-4860 2012 equity index, negatively affected by the U.S. Treasury bill rate, the domestic interest rate and the money supply, and not impacted by industrial production and the exchange rate. Studying real stock returns for seven Latin American countries, Araújo (2009) shows that for Argentina, the supply shock, the portfolio shock and the demand shock can explain 60.37%, 24.11% and 8.32% of the variation in real stock returns, respectively. He also indicates the correlation coefficient of 0.3703 between real stock returns in Argentina and the U.S. is significant at the 1% level.…”

“…Extending previous studies, we can express the Argentine stock market index as a function of the following macroeconomic and global variables: We expect that the sign of real GDP (Chen, 1986;Fama, 1990;Abdullah and Hayworth, 1993;Mukherjee and Naka, 1995) and the U.S. stock price (Fernández-Serrano and Sosvilla-Rivero1, 2003;Araújo, 2009;Jawadi, Arouri and Nguyen, 2010) to be positive, the sign of the interest rate (Fama, 1981(Fama, , 1990Mukherjee and Naka, 1995;Ratanapakorn and Sharma, 2007;Humpe and Macmillan, 2009)and the inflation rate (Fama, 1981;Geske and Roll, 1983;Mukherjee and Naka, 1995) to be negative, and the sign of the money supply (Ratanapakorn and Sharma, 2007;Abugri , 2008;Humpe and Macmillan, 2009), the ratio of government spending to GDP (Darrat, 1990a(Darrat, , 1990b and the exchange rate (Nieh and Lee, 2001;Kim, 2003;Ratanapakorn and Sharma, 2007;Abugri, 2008) to be unclear.…”

“…For example, the positive significant or insignificant coefficient for the inflation rate (Spyrou, 2004), the relatively low correlation between stock market indexes between Argentina and the U.S. (Araújo, 2009), lack of a long-term stable relationship between the stock market indexes in Argentina and the U.S. (Jawadi, Arouri and Nguyen, 2010), the insignificant coefficients of industrial production and the exchange rate and the negative significant coefficient of the money supply for Argentina reported by Abugri (2008) need to be reexamined to determine whether a different methodology and a more recent sample with 10 more years of data may yield different results.…”

Investment Strategies of Different Holding Periods: Evidence from Stock Markets of Hong Kong, Korea, Shanghai, and Taiwan

“…Once a positive sign of value of shares appears among investors, demand for new shares spikes in stock markets, which pulls the price of the shares up. But, this suitable period of time does not last forever and difficult times for equity values could be the next movement of the stock market (Araujo, 2009;Chow, Kim, & Sun, 2007). Therefore, studies in finance overwhelmingly agree that the volatility in stock markets is the direct reaction to the investment behavior of fund managers.…”