scholarly journals FINANCIAL CONTAGION BETWEEN THE US AND EMERGING MARKETS: COVID-19 PANDEMIC CASE

2020 ◽  
Author(s):  
Paula Heliodoro ◽  
◽  
Rui Dias ◽  
Paulo Alexandre ◽  
◽  
...  
Keyword(s):  
Financial Markets ◽  
Latin American ◽  
Stock Markets ◽  
Null Hypothesis ◽  
Sustainable Growth ◽  
Financial Contagion ◽  
Policy Makers ◽  
Global Pandemic ◽  
The Us ◽  
Bds Test

To realise how crises are disseminated is relevant for policy makers and regulators in order to take appropriate measures to prevent or contain the propagation of crises. This study aims to analysis the financial contagion in the six main markets of Latin America (Argentina, Brazil, Chile, Colombia, Mexico and Peru) and the USA, in the period 2015-2020. Different approaches have been undertaken to carry out this analysis in order to consider the following research question, namely whether: (i) the global pandemic covid19 has accentuated the contagion between Latin American financial markets and the US? The results of the autocorrelation tests are totally coincident with those obtained by the BDS test. The rejection of the null hypothesis, i.i.d., can be explained, among other factors, by the existence of autocorrelation or by the existence of heteroscedasticity in the stock market index series, in which case the rejection of the null hypothesis is explained by non-linear dependence on data, with the exception of the Argentine market. However, significant levels of contagion were expected to occur between these regional markets and the US as a result of the global pandemic (Covid-19), which did not happen. These results may indicate the implementation of efficient diversification strategies. The authors consider that the results achieved are relevance for investors who seek opportunities in these stock markets, as well as for policy makers to carry out institutional reforms in order to increase the efficiency of stock markets and promote the sustainable growth of financial markets.

INTEGRATION IN BRIC STOCK MARKETS: AN EMPIRICAL ANALYSIS

2020 ◽  
Author(s):  
Paula Heliodoro ◽  
◽  
Rui Dias ◽  
Paulo Alexandre ◽  
Cristina Vasco ◽  
...  
Keyword(s):  
Financial Markets ◽  
Stock Markets ◽  
Sovereign Debt ◽  
Financial Integration ◽  
Statistical Significance ◽  
Sustainable Growth ◽  
Portfolio Diversification ◽  
Impulse Response Functions ◽  
Institutional Reforms ◽  
Global Pandemic

This paper aims to analyse financial integration in the markets of Brazil, China, India and Russia (BRIC’s), from July 2015 to June 2020, being the sample split in pre and during the global pandemic (Covid-19). In order to carry out this analysis, different approaches were undertaken to analyse two issues, namely, whether: (i) the global pandemic has accentuated the interdependencies in the BRIC financial markets? If so, how it has influenced the efficiency of portfolio diversification. The results suggest very significant levels of integration, in the Covid period these evidences diminish the chances of portfolio diversification in the long term. In turn, the analysis of the relationship between markets, in the short term, through the impulse response functions, in a period of global pandemic, shows positive/negative movements, with statistical significance, with persistence exceeding one week. In addition, there was no immediate adjustment in prices between markets, due to the high levels of shocks identified. Regarding the implementation of efficient portfolio diversification strategies, we consider that a good option for investors would be to avoid investments in stock markets. In this sense, one suggestion could be to invest in derivatives, gold and sovereign debt markets, with the purpose of diversifying portfolios and mitigating the risk arising from the global pandemic. The authors consider that the results achieved are of interest to investors seeking opportunities in these exchanges, as well as to policy makers to undertake institutional reforms in order to increase the efficiency of stock markets and promote the sustainable growth of financial markets.

scholarly journals HOW LONG IS THE MEMORY OF THE REGION LAC STOCK MARKET?

2020 ◽  
Vol 3 (2) ◽  
pp. 131-137
Author(s):  
Paulo Alexandre ◽  
Rui Dias ◽  
Paula Heliodoro
Keyword(s):  
Financial Markets ◽  
Weak Form ◽  
Sustainable Growth ◽  
World Health ◽  
Stock Exchanges ◽  
Institutional Reforms ◽  
Policy Makers ◽  
Global Pandemic ◽  
Daily Data ◽  
Health Organization

Coronavirus Covid-19 is a type of outbreak that first appeared in December 2019 in the city of Wuhan, Hubei Province, China. It was declared a pandemic by the World Health Organization (WHO) on March 12, 2020. This trial aims to test the hypothesis of an efficient market, in its weak form, in the context of the global pandemic, in the financial markets of Argentina, Brazil, Chile, Colombia, Peru, Mexico. The sample comprises daily data from July 2015 to June 2020 and is divided into two sub-periods pre and during Covid-19. The purpose of this analysis was to answer whether: i) the global pandemic (Covid-19) increased synchronization in the financial markets under analysis? ii) if so, could the persistence of profitability delimit the hypothesis of portfolio diversification? The results of the Gregory-Hansen test show very significant levels of integration in the periods before and during the Covid pandemic. In addition, we found that most of the breaks in structure are in March 2020. The results of the DFA exponents show that during the pre-Covid period, the Peruvian market shows persistence, suggesting signs of inefficiency (long memories), while the Argentinean market shows anti persistence, and the remaining markets show an equilibrium trend. In addition, we found that during the VOCID period the Chilean and Colombia markets show very significant signs of inefficiency, with moderate signs of in (efficiency) the Argentinean, Brazilian and Peruvian markets. In addition, we verified that the Mexican market shows signs of anti-persistence. In conclusion, the emerging markets of Latin America show, for the most part, long persistent and significant memories during the Covid pandemic outbreak, that is, they show signs of in (efficiency). The authors consider that the results achieved are of interest to investors seeking opportunities in these stock exchanges, as well as to policy makers to carry out institutional reforms in order to increase the efficiency of stock markets and promote the sustainable growth of financial markets.

Foreign States in Domestic Markets

2021 ◽  
Author(s):  
Mark Thatcher ◽  
Tim Vlandas
Keyword(s):  
Political Economy ◽  
Financial Markets ◽  
Domestic Politics ◽  
National Policy ◽  
Sovereign Wealth Funds ◽  
Policy Makers ◽  
Domestic Markets ◽  
The Us ◽  
The Uk ◽  
Domestic Economies

Political economy debates have focused on the internationalization of private capital. But foreign states increasingly enter domestic markets as financial investors. How do policy makers in recipient countries react? Do they treat purchases as a threat and impose restrictions or see them as beneficial and welcome them? What are the wider implications for debates about state capacities to govern domestic economies in the face of internationalization of financial markets? In response, the book develops the concept of ‘internationalized statism’—governments welcoming and using foreign state investments to govern their domestic economies—and applies it to the most prominent overseas state investors: Sovereign Wealth Funds (SWFs). Many SWFs are from Asia and the Middle East and their number and size have greatly expanded, reaching $9 trillion by 2020. The book examines policies towards non-Western SWFs buying company shares in four countries: the US, the UK, France, and Germany. Although the US has imposed significant legal restrictions, the others have pursued internationalized statism in ways that are surprising given both popular and political economy classifications. The book argues that the policy patterns found are related to domestic politics, notably the preferences and capacities of the political executive and legislature, rather than solely economic needs or national security risks. The phenomenon of internationalized statism underlines that overseas state investment provides policy makers in recipient states with new allies and resources. The study of SWFs shows how and why internationalization and liberalization of financial markets offer national policy makers opportunities to govern their domestic economies.

scholarly journals An Analysis of Stock Return Transmission in North and Latin America

2019 ◽  
Vol 10 (6) ◽  
pp. 14
Author(s):  
Chikashi Tsuji
Keyword(s):  
Latin America ◽  
Stock Returns ◽  
Latin American ◽  
Stock Markets ◽  
Stock Return ◽  
The Other ◽  
Var Model ◽  
Recent Period ◽  
The Us ◽  
Standard Vector

This study empirically examines the return transmission effects between the four North and Latin American stock markets in the US, Canada, Brazil, and Mexico. More specifically, applying a standard vector autoregression (VAR) model, we obtain the following interesting findings. First, (1) the return transmission effects between the four North and Latin American stock markets became much tighter in our second subsample period. Second, (2) in particular, US and Mexican stock markets are strong return transmitters in the recent period. Furthermore, (3) both in our first and second subsample periods, Brazilian stock returns do not transmit to the other three stock returns, although the other three North and Latin American stock markets affect the Brazilian stock market.

Measuring Dependence Between the USA and the Asian Economies: A Time-varying Copula Approach

2019 ◽  
Vol 20 (4) ◽  
pp. 962-980 ◽  
Author(s):  
Shegorika Rajwani ◽  
Dilip Kumar
Keyword(s):  
Financial Crisis ◽  
Stock Market ◽  
Financial Markets ◽  
Stock Markets ◽  
Global Financial Crisis ◽  
Tail Dependence ◽  
Time Varying ◽  
The Us ◽  
Asian Economies ◽  
Copula Approach

During the past few years, many of the financial markets have gone through devastating effects due to the crisis in one or the other economy of the world. The recent global financial crisis has triggered dramatic movements in various stock markets which may arise from interdependence or contagion between the markets. This article attempts to measure the contagion between the equity markets of Asia and the US stock market. The countries considered in the Asian group are China, India, Indonesia, South Korea, Taiwan, Hong Kong, Malaysia and Japan. Most of the Asian economies have experienced drastic higher volatility and uncertainty in the financial markets. If the markets are contagious, then the investors will be unable to reap benefits through international diversification of the portfolio. In such a case, the policymakers will further frame policies so that they can insulate themselves from inflicting heavy damage from various crises. To achieve our goal, we make use of the time-varying copula approach which helps us to study the joint behaviour of the series based on their marginal distribution. Time-varying copula approach can also capture the non-linear dependence in the series and exhibits a rich pattern of tail behaviour. Our findings support the contagion between the Asian stock markets and the US stock market during the global financial crisis. This article also highlights that the increased tail dependence is an important factor for the contagion between the Asian stock markets and the US market.

scholarly journals Spillovers from the Slowdown in China on Financial and Energy Markets: An Application of VAR–VECH–TARCH Models

2020 ◽  
Vol 8 (3) ◽  
pp. 52
Author(s):  
Caner Özdurak ◽  
Veysel Ulusoy
Keyword(s):  
Rare Earth ◽  
Financial Markets ◽  
Stock Markets ◽  
Global Economy ◽  
Global Financial Crisis ◽  
Wide Range ◽  
The Us ◽  
Chinese Stock Markets ◽  
The Impact ◽  
Industrial Metals

The 2008 global financial crisis provides us with a wide range of study fields on cross-asset contagion mechanisms in the US financial markets. After a decade of the so-called subprime crisis, the impact of market news on asset volatilities increased significantly. Consequently, return and volatility spillovers became the most extensive channel for spreading out the news generated in one market to the other ones, which made the financial markets inherit international risk factors as their own local risks. Moreover, as a result of the Chinese economy becoming the main driver of the global economy in the last decade, Chinese markets became more interconnected with developed markets which were followed by a “digital cold war” era via Twitter. In this study, we investigate the relationship between the US stock market, Chinese stock markets, rare earth markets and industrial metals, and mining products via three different models by utilizing VAR–VECH–TARCH models. According to our findings, bilateral spillover exists between US and Chinese stock markets. Cross-market spillovers show that there is a risk transmission channel between the industrial metals, rare earth, and Chinese and US stock markets due to China’s strengthening position in the global economy.

BUBBLES AND ANTI-BUBBLES IN LATIN-AMERICAN, ASIAN AND WESTERN STOCK MARKETS: AN EMPIRICAL STUDY

2001 ◽  
Vol 04 (06) ◽  
pp. 853-920 ◽  
Author(s):  
ANDERS JOHANSEN ◽  
DIDIER SORNETTE
Keyword(s):  
Latin American ◽  
Stock Markets ◽  
Rational Expectation ◽  
Specific Power ◽  
Speculative Bubbles ◽  
Geometric Patterns ◽  
The Us ◽  
Expectation Model ◽  
The Usa ◽  
Exchange Markets

Twenty-one significant bubbles followed by large crashes or severe corrections in Latin-American and Asian stock markets are identified. We find that, with very few exceptions, these speculative bubbles can be quantitatively described by a rational expectation model of bubbles predicting a specific power law acceleration as well as so-called log-periodic geometric patterns. This model considerably extends the applicability of the rational expectation model of bubbles followed by crashes or severe corrections previously proposed for the major financial markets in the world, i.e. the USA and the foreign exchange markets. A comparison of the model predictions using the price and the logarithm of the price, respectively, furthermore indicates according to our model that such large downward movements in the markets are nothing but depletions of the preceding bubble thus bringing the market back towards equilibrium. In addition, a set of secondary stock markets are also shown to exhibit well-correlated "anti-bubbles" triggered by a rash of crises on emerging markets in early 1994. This suggests that smaller stock markets can weakly synchronize not only because of the over-arching influence of the US market, but also independent of the US market due to external factors such as the Asian crisis of 1994.

scholarly journals The source of financial contagion and spillovers: An evaluation of the covid-19 pandemic and the global financial crisis

PLoS ONE ◽  
2022 ◽  
Vol 17 (1) ◽  
pp. e0261835
Author(s):  
Samet Gunay ◽  
Gokberk Can
Keyword(s):  
Financial Crisis ◽  
Stock Markets ◽  
Global Financial Crisis ◽  
Financial Contagion ◽  
Test Results ◽  
Developed Economies ◽  
Volatility Spillovers ◽  
The Us ◽  
The Global Financial Crisis ◽  
The Impact

This study investigates the reaction of stock markets to the Covid-19 pandemic and the Global Financial Crisis of 2008 (GFC) and compares their influence in terms of risk exposures. The empirical investigation is conducted using the modified ICSS test, DCC-GARCH, and Diebold-Yilmaz connectedness analysis to examine financial contagion and volatility spillovers. To further reveal the impact of these two crises, the statistical features of tranquil and crisis periods under different time intervals are also compared. The test results show that although the outbreak’s origin was in China, the US stock market is the source of financial contagion and volatility spillovers during the pandemic, just as it was during the GFC. The propagation of shocks is considerably higher between developed economies compared to emerging markets. Additionally, the results show that the COVID-19 pandemic induced a more severe contagious effect and risk transmission than the GFC. The study provides an extensive examination of the COVID-19 pandemic and the GFC in terms of financial contagion and volatility spillovers. The results suggest the presence of strong co-movements of world stock markets with the US equity market, especially in periods of financial turmoil.

scholarly journals Assessing Volatilities of Monetary Policy and their Effects on the Islamic and Conventional Stock Markets in Indonesia

2018 ◽  
Vol 7 (2) ◽  
pp. 161-172
Author(s):  
M Shabri Abd Majid
Keyword(s):  
Monetary Policy ◽  
Exchange Rate ◽  
Interest Rate ◽  
Interest Rates ◽  
Money Supply ◽  
Open Economy ◽  
Stock Markets ◽  
Monetary Shocks ◽  
Policy Makers ◽  
The Us

The main objective of this study is to empirically assess the volatilities of the monetary policy instruments and their effects on the Indonesian Islamic and conventional stock market. The changes in exchange rate, interest rates, and money supply and their effects on the stock markets are investigated using the using the Generalized Autoregressive Conditional Heteroskedasticity frameworks. As a big-open economy, the capital market of Indonesia is vulnerable to the global monetary shocks changes, thus the US federal funds rate is also incorporated into the GARCH model. The study documented that, with the exception of the US interest rate, the volatilities of all monetary policy variables of interest rate, exchange rate, and money supply were documented affecting the volatilities of both Islamic and conventional stock markets. These findings imply that the volatilities of Islamic and conventional stock markets have similar determinants, thus to stabilize the markets, the investigated monetary policy variables should be controlled for by the policy-makers. Any monetary policy design imposed by the policy-makers would have a similar effect on both conventional and Islamic stocks in Indonesia.DOI: 10.15408/sjie.v7i2.7352

scholarly journals Is There a Causal Relationship Between Financial Markets in Asia and the US?

2017 ◽  
Vol 22 (1) ◽  
pp. 71-90
Author(s):  
Amalendu Bhunia ◽  
Devrim Yaman
Keyword(s):  
Stock Market ◽  
Financial Markets ◽  
Causal Relationship ◽  
Stock Markets ◽  
Market Prices ◽  
Long Run ◽  
The Us ◽  
Short Run ◽  
International Investors ◽  
Stock Values

This study examines whether there is a causal relationship between selected stock markets in Asia and the US. Based on stock values from a sample of nine Asian stock markets, we find a positive correlation with US stock market prices in most cases, the exception being Vietnam. Our results indicate significant long-run and short-run causality in both directions between the Asian and US stock markets. These findings show that, while both sets of markets are integrated, there are still valuable opportunities for international investors to diversify their portfolios in the US and Asia.

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