Financial markets of the LAC region: Does the crisis influence the financial integration?

Dias, Rui; Silva, Jacinto Vidigal da; Dionísio, Andreia

doi:10.1016/j.irfa.2019.02.008

Cited by 43 publications

(26 citation statements)

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“…If a particular financial market is synchronized with another country's market, the financial soundness of the former somewhat depends on the second's financial stability. The market integration situation may have significant implications for international portfolios diversification [2].…”

Section: Introductionmentioning

confidence: 99%

Testing the Weak Form of Efficient Market Hypothesis: Empirical Evidence from Equity Markets

Dias¹,

Heliodoro²,

Teixeira³

et al. 2020

IJAFRM

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The aim of this paper is to analyse integration and test the hypothesis of an efficient market, in its weak form, in sixteen international financial markets. The sample covers the period from January 2002 to July 2019 and is divided into three sub-periods. In order to achieve such an analysis, the aim is to provide answers to two questions. Has the global financial crisis intensified the financial integration of international markets? If there is a process of mean-reversion in the international stock markets, with arbitrage, the hypothesis of portfolio diversification will be feasible? The results suggest that the global financial crisis has intensified the integration level of international financial markets. Regarding random walk and market efficiency hypotheses, in its weak form, the results suggest the existence of a mean-reversion and the rejection of the hypothesis of information efficiency, in its weak form, in developed and emerging markets, European and non-European. In terms of portfolio diversification analysis, we see that levels of financial integration decreased significantly in the sub-period following the global financial crisis, namely with its respective benchmarks, such as the US market, Japan and Hong Kong. We can assess the existence of feasible diversification opportunities in the long term.

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Section: Introductionmentioning

confidence: 99%

Testing the Weak Form of Efficient Market Hypothesis: Empirical Evidence from Equity Markets

Dias¹,

Heliodoro²,

Teixeira³

et al. 2020

IJAFRM

Self Cite

View full text Add to dashboard Cite

show abstract

“…It is of high relevance to detect international links between capital markets and to verify if they are financially integrated. A capital market is considered integrated when financial products with the same risk characteristics exhibit the same expected rate of return, regardless of where they are traded (Dias et al, 2019). A closer or strong linkage between markets increases the levels of vulnerability to external shocks and, as a result, may jeopardize the efficiency of portfolio diversification (Dias et al, 2019).…”

Section: Introductionmentioning

confidence: 99%

Integration in Central European capital markets in the context of the global COVID-19 pandemic

Pardal

Dias

Šuleř

et al. 2020

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Research background: Covid-19 pandemic had a strong impact on the economy and capital market. In times of crisis, it is important for investors to be able to diversify their investment portfolio in order to mitigate risk. However, the growing trend towards capital market integration may make it ineffective. Research on financial integration, during the Covid-19 period, has started to develop, mainly in major global capital markets. It is, therefore, important to extend this research to other capital markets. The purpose of the article: This contribution aims to analyze financial integration in the stock indexes of the capital markets of Austria (ATX), Slovenia (SBITOP), Hungary (BUDAPEST SE), Lithuania (OMX VILNIUS), Poland (WIG), the Czech Republic (PX PRAGUE), Russia (MOEX) and Serbia (BELEX 15), in the context of the global pandemic (COVID-19). Methods: To measure the unit roots in the time series, we used ADF, PP, and KPSS tests, and Clemente et al. (1998) test to detect structural breaks. To ana-lyse financial integration, we applied the Gregory and Hansen integration test, and to validate the robustness of results, we use the impulse-response function (IRF) methodology, with Monte Carlo simulations, as they provide a dynamic analysis generated from the VAR model estimates. Findings & Value added: The results suggest very significant levels of integration, which decreases the chances of portfolio diversification in the long-term. Evidence shows 47 pairs of integrated stock market indexes (out of 56 possible). The stock indexes ATX, BUDAPESTE SE, BELEX 15 show financial integration with all other indexes. On the contrary, the index of OMX VILNIUS shows only 3 integrations. Results also show that most of the significant structural breaks occurred in March 2020. The analysis of the relationship between markets, in the short term, shows positive/negative co-movements, with statis-tical significance and with a persistence longer than one week.

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“…In times of agitation, investors should rebalance their portfolios by closing long positions in markets with significant levels of risk. (Dias, da Silva, and Dionísio, 2019;Mohammadpoor and Rezazadeh, 2019;Morales and Gassie, 2014).…”

Section: Introductionmentioning

confidence: 99%

Safe Haven, Hedge and Diversification for Stock Markets: Gold Versus Silver

Farinha¹,

Dias²,

Heliodoro³

et al. 2020

Fourth International Scientific Conference ITEMA Recent Advances in Information Technology, Tourism, Economics, Management and

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This paper aims to analyse if whether Gold (Gold Bullion: Zurich) and Silver (Silver Paris Spot E/KG) will be a safe haven for portfolio diversification in the financial markets of Germany (DAX 30), USA (DOW JONES), France (CAC 4 0), Italy (FTSE MID), United Kingdom (FTSE 100), Hong Kong (Hang Seng), China (SHANGHAI SE ASHARE), Japan (NIKKEI 225), in the period between 1 January 2019 to 2 September 2020. In order to perform this analysis where undertaken different approaches to analyse if: (i) the gold and silver market will be a safe haven when financial markets break down? (ii) If so, can market shocks question portfolio diversification? The results suggest 53 pairs of integrated markets (out of 90 possible). Gold and Silver have integrations with each other and with the USA, but the other financial markets integrate with Gold and Silver, namely the US, France, UK, Italy and Hong Kong markets (the latter only with Silver). The China market has a single integration but is integrated by the USA, France, the United Kingdom, Italy, and Germany, which partially rejects the first investigation question. In corroboration, causality tests show 67 causal relationships (out of 90 possible). The Markets of Italy (FTSE MID), the USA (DOW JONES) cause, in the Grangerian sense, all its peers (9 out of 9 possible), while France (CAC 40), the United Kingdom (FTSE 100), Japan (NIKKEI 225), and Germany (DAX 30) cause 8 out of 9. Silver and Gold cause the financial markets 7, and 6 times (out of 9 possible), respectively, while the Hong Kong (Hang Seng) and China (SHANGHAI) markets cause 3 and once, respectively, which validates the second investigation question. Given the high level of integration and shocks between markets, portfolio diversification may be brought into question. These findings also make room for market regulators to take steps to ensure better information among international financial markets.

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Financial markets of the LAC region: Does the crisis influence the financial integration?

Cited by 43 publications

References 43 publications

Testing the Weak Form of Efficient Market Hypothesis: Empirical Evidence from Equity Markets

Testing the Weak Form of Efficient Market Hypothesis: Empirical Evidence from Equity Markets

Integration in Central European capital markets in the context of the global COVID-19 pandemic

Safe Haven, Hedge and Diversification for Stock Markets: Gold Versus Silver

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