Stock market integration in Mexico and Argentina: are short- and long-term considerations different?

Abstract

This article aims to study the issue of short- and long-term stock market integration in two of Latin America's biggest emerging economies – Mexico and Argentina – with the US stock market using multivariate cointegration tools. Our study covers a period of two decades and shows strong evidence of Argentina and Mexico's short-term financial dependence on the US market. However, our results show no long-term linkages between the markets studied, indicating that Mexican and Argentinean stock markets are governed more by their fundamentals in the long term.

Notes

¹Results of unit root tests are not presented in detail but are available upon request addressed to the corresponding author.

²The US Foreign Direct Investments in Argentina consist of 44% whereas those in Mexico are about 54%.

³The details of the determination of lag number are not reported here but are available upon request.

⁴See Hamilton (1994) for more details.