Financial Integration of Emerging Markets: An Analysis of Latin America Versus South Asia Using Individual Stocks

Abstract

This article presents an analysis of financial integration for emerging financial markets. The results indicate that for the sample of countries examined, Argentina, Chile, Mexico and Thailand's stock markets are financially integrated. Conclusions are reached by first identifying endogeonous breaks in multiple stock return series and then constructing confidence intervals around these break dates. Further support is provided that identified breaks are due to integration by performing statistical analyses on the return series pre and post break. In general, the stocks in integrated countries become more correlated with world and industry indexes. Mean returns for these stocks decrease and become more aligned with the mean returns of their respective industry indexes. In cases where we do not find supporting evidence for financial integration, the break dates correspond to currency crises or other events that caused a shift in the return series (JEL G15, G12).

The evolution of stock market integration in the post-liberalization period – A look at Latin America

“…However, he finds that Mexico is fully integrated using the integration index but not the conditional correlation. Our results for Argentina, Chile, and Mexico are also different from those of Goldberg and Delgado (2001), who find that these markets are integrated. However, their test of integration is based primarily on identifying the ''endogenous break dates'' in returns on individual stocks (see, e.g., Bekaert et al, 2002).…”

Interdependence and dynamic linkages between the emerging stock markets of South Asia

“…While the title ofGoldberg and Delgado's (2001) article suggests that they look at financial integration in South Asia, with the exception of India, the other South Asian countries (Indonesia, Malaysia and Thailand) which they consider are better described as being in South-East Asia.…”

International and Regional Capital Mobility in Latin American Countries

“…Most of the previous studies utilize various measures to assess the degree of global and regional integration of both advanced and emerging economies. For example, some studies analyse stock data to measure the extent to which developed and developing economies are globally and regionally integrated (e.g., Goldberg & Delgado, 2001;Edison et al, 2002;Barari, 2004;Jawadi et al, 2009;Coudert et al, 2015). Other studies employ consumption risk sharing models to examine global vs regional integration (e.g., Kim et al, 2004Kim et al, , 2006Kim & Lee, 2008).…”