Working Paper: NBER ID: w8506
Authors: Sebastian Edwards; Raul Susmel
Abstract: In this paper we use weekly stock market data for a group of Latin American countries to analyze the behavior of volatility through time. We are particularly interested in understanding whether periods of high volatility are correlated across countries. The analysis uses both on univariate and bivariate switching volatility models. Our results do not rely on the correlation coefficients, but on the co-dependence of volatility regimes. The results indicate that high-volatility episodes are, in general, short-lived, lasting from two to twelve weeks. We find strong evidence of volatility co-movements across countries, especially among the Mercosur countries.
Keywords: No keywords provided
JEL Codes: F3; G12; G15
Edges that are evidenced by causal inference methods are in orange, and the rest are in light blue.
| Cause | Effect |
|---|---|
| high volatility states (H79) | periods of financial contagion (F65) |
| volatility comovements (C58) | regional financial instability (F65) |
| high volatility periods (E32) | increased correlations among Latin American emerging stock markets (O54) |
| international crises (F51) | volatility dependence among Latin American markets (N26) |
| volatility in stock markets (G17) | duration of high volatility (C41) |
| Hong Kong's volatility dependence (C58) | Latin American markets (N26) |