Stock market development and economic performance: The case of Mexico

Ponce, Ramón A. Castillo; Espinosa, María de Lourdes Rodríguez; Alfaro, Édgar David Gaytán

doi:10.4067/s0718-88702015000100003

Cited by 4 publications

(5 citation statements)

References 43 publications

(35 reference statements)

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“…As the Mexican stock market matures, it is expected to respond more accordingly to changes in economic fundamentals, as stock markets do in developed economies. For example, in a study about Mexico, Castillo-Ponce et al (2015) find evidence that the stock market has matured and is now responding to economic fundaments. However, there is not enough literature analyzing the determinants of stock returns, and this study contributes as one of the pioneers in examining the relationship between macroeconomic factors and the performance of Mexican firm stocks.…”

Section: Discussionmentioning

confidence: 99%

The effect of macroeconomic variables on the robustness of the traditional Fama–French model. A study for Mexico using different portfolios

Saucedo

González²

2021

JEFAS

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PurposeFama–French model (FFM) has been successful in helping to predict the financial markets, but investors have been interested in creating more sophisticated models to better predict the performance of the stock market. The objective of the extended version is to create a more robust econometric model to better predict the performance of the Mexican Stock Market.Design/methodology/approachThe study divides the Mexican Stock Market into six different portfolios. The criteria to build those portfolios are the same one used in Fama–French (1992). The study comprises 78 stocks listed in the Mexican Stock Market that are analyzed monthly during 1997–2018. The study analyzes the period before and after the 2008–2009 financial crisis to identify whether there are important changes. The estimation applies the traditional and an extended version of the FFM that include macroeconomic variables such as country risk, economic activity, inflation rate, and exchange rate and some financial variables recommended in the literature.FindingsResults indicate that classic FFM variables are statistically significant in most cases, but relevant macroeconomic variables such as the interest rate, exchange rate and country risk stand out for being weakly relevant in most of the portfolios. However, it is noticed that some of these macroeconomic variables became relevant for different portfolios only after the 2008–2009 crisis, especially in portfolios which include small market capitalization firms.Research limitations/implicationsThe study includes the stocks listed in the Mexican Stock Market. One limitation is the small number of stocks available, which reduces the possibility of creating well diversified portfolios. This study includes 78 stocks. The stocks removed from the sample are from firms that were not listed during six consecutive months or whose market capitalization did not change in the same period. Outlier data were removed from the sample to capture in better way the general performance of the stock market.Practical implicationsThe objective of the extended version is to create a more robust econometric model than the traditional model. It is expected that such estimations can be helpful to investors to make better decisions when they try to predict performance in the stock market.Social implicationsAn extended version of the FFM can be helpful to investors to make better decisions when they try to predict performance in the stock market.Originality/valueTo the best of our knowledge there are no more studies in the literature of the Mexican financial market that apply the same methodology.

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Section: Discussionmentioning

confidence: 99%

The effect of macroeconomic variables on the robustness of the traditional Fama–French model. A study for Mexico using different portfolios

Saucedo

González²

2021

JEFAS

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“…Since Levine (1991) several other studies have been published on the topic, the majority of which state that there is a positive relationship between the economic development/growth and the stock market liquidity (Ahmad, Etudaiye-Muhtar, Matemilola, & Bany-Ariffin, 2016;Apergis et al, 2015;Beck & Levine, 2004;Caporale et al, 2004;Carp, 2012;Castillo-Ponce, Rodriguez-Espinosa, & Gaytan-Alfaro, 2015;Cooray, 2010;Enisan & Olufisayo, 2009;Florackis et al, 2014;Levine & Zervos, 1998;Meichle et al, 2011;Naes et al, 2011;Ngare, Nyamongo, & Misati, 2014;Nowbutsing & Odit, 2009;Pradhan et al, 2015Pradhan et al, , 2014Rahman & Salahuddin, 2010;Rousseau & Wachtel, 2000;Smimou, 2014;Srinivasan, 2014;Wu et al, 2010). The time span analysed by these authors vary significantly, both in terms of starting and ending years - Naes et al (2011) captured data since 1947 whereas Srinivasan (2014) analysed the data available until 2013as well as its length that diverge from 11 years (Cooray, 2010) to 61 years (Naes et al, 2011).…”

Section: Economic Growth and Liquiditymentioning

confidence: 99%

“…that analysed 40 and 35 countries, respectively. There are also some authors that studied only one country, for instance, Cote D'Ivoire byN'Zué (2006), Nigeria byNurudeen (2009), Mauritius byNowbutsing & Odit (2009), Pakistan byRahman & Salahuddin (2010), Switzerland byMeichle et al (2011), Romania byCarp (2012), India bySrinivasan (2014), United Kingdom byFlorackis et al (2014),Canada bySmimou (2014) or Mexico byCastillo-Ponce et al (2015). Other studies focus on a specific group of countries, for exampleAhmad et al (2016),Enisan & Olufisayo (2009) andNgare et al (2014) that studied only African countries, Wu et al (2010) that analysed 13 European Union (EU) countries, Pradhan et al…”

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confidence: 99%

Stock Market Liquidity Impact on Economic Development

Silva¹

2023

Rethinking Management and Economics in the New 20’s

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This work analyses the relationship between the stock market liquidity and the country's economic development, which has been object of interest of many researches lately. The stock market liquidity is considered to have a huge impact on a country's economic development. However, all the known studies focused on the economic growth as proxy for the economic development, instead of using a composition of various dimensions to explain the true economic development of a country.Therefore, the main aim of this work is to contribute to this branch of the literature by using the Human Development Index as proxy for the economic development. The stock market liquidity was calculated based on the Amihud's (2002) illiquidity measure, which is one of the most reliable measures of this area.This study was carried out based on a wide and diversified sample with 59 countries.The sample period is comprised between 1990 and 2015, with annual frequency data. Firstly, the correlations between the stock market liquidity and economic development are calculated for each country using the Spearman's non-parametric correlation test. Then, were applied the pooled OLS and fixed and random effects regression models, being the most suitable model then chosen through the F, Breusch-Pagan and Hausman tests. When analysed individually, most of the countries have a positive correlation coefficient between the stock market liquidity and economic development, which is consistent with the statistically significant positive relationship when analysing the global sample. Dividing the original sample by the level of economic development of the countries and by the period before and after the economic crisis of 2008, there are statistically significant changes in the impact of the stock market liquidity on the countries' economic development. Only the developing countries presented a statistically significant negative relationship between the two analysed dimensions, contrary to the initial expectations. Still, this result may be related to the greater difficulties in the transaction of assets, reducing liquidity and slowing down economic growth.

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“…Asimismo, los indicadores del desarrollo del mercado accionario se seleccionaron de acuerdo con lo que se ha planteado previamente en la literatura (véase, por ejemplo, Adebayo et al, 2020;Beck et al, 2010;Ghimire & Giorgioni, 2013;Ho & Iyke, 2017;Pradhan, 2018). Diversas investigaciones consideran a los índices accionarios como proxy del tamaño del mercado, por lo que aquí se incluye al IPC, el principal índice accionario de la Bolsa Mexicana de Valores, como se ha hecho en estudios previos (Castillo-Ponce et al, 2015;Ron Delgado, 2001). No obstante, se ha señalado que los índices accionarios no necesariamente son un buen proxy del tamaño del mercado debido al proceso de selección de los componentes, en el que intervienen comités.…”

Section: Descripción De Los Datosunclassified

“…Según lo que planteanCastillo-Ponce et al (2015), este resultado también podría interpretarse como evidencia en contra de la Hipótesis de los Mercados Eficientes.…”

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Desarrollo del mercado accionario y crecimiento económico en México: un examen mediante los enfoques ARDL y No causalidad

Samaniego

2020

CyA

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<p>Este trabajo de investigación examina la interacción entre el desarrollo del mercado de valores y el crecimiento económico en México. Las pruebas de raíz unitaria con cambios estructurales muestran que de todas las crisis registradas entre 1993 y el primer trimestre de 2018, la llamada Crisis del Tequila de mediados de la década de 1990 fue la más relevante ya que afectó a todas las variables examinadas. Al aplicar el modelo ARDL con pruebas de límites, el estudio encontró cointegración entre la dinámica de<br />los indicadores económicos y varias variables del mercado de valores, pero no con el Índice de Precios y Cotizaciones. Los resultados de la prueba de no causalidad de Granger a través de la metodología Toda & Yamamoto sugieren que la capitalización de mercado provocó el crecimiento económico en México e indican una causalidad bidireccional entre el crecimiento económico y el índice de capitalización de mercado.</p>

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Stock market development and economic performance: The case of Mexico

Abstract: We evaluate the association between stock market development and the aggregate economy for the long-run and the short-run. We Clasificación JEL: C32, E20, G20.

Cited by 4 publications

References 43 publications

The effect of macroeconomic variables on the robustness of the traditional Fama–French model. A study for Mexico using different portfolios

The effect of macroeconomic variables on the robustness of the traditional Fama–French model. A study for Mexico using different portfolios

Stock Market Liquidity Impact on Economic Development

Desarrollo del mercado accionario y crecimiento económico en México: un examen mediante los enfoques ARDL y No causalidad

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