Paula Heliodoro – Polytechnic Institute of Setúbal, School of Business and Administration, Esce, Campus do Instituto
Politécnico de Setúbal, Estefanilha, 2914-503 Setúbal, Portugal
Paulo Alexandre – Polytechnic Institute of Setúbal, School of Business and Administration, Esce, Campus do Instituto
Politécnico de Setúbal, Estefanilha, 2914-503 Setúbal, Portugal
Rui Dias – Polytechnic Institute of Setúbal, School of Business and Administration, Esce, Campus do Instituto
Politécnico de Setúbal, Estefanilha, 2914-503 Setúbal, Portugal




5th International Scientific-Business Conference – LIMEN 2019 – Leadership, Innovation, Management and Economics: Integrated Politics of Research – SELECTED PAPERS, Graz, Austria, December 12, 2019, published by the Association of Economists and Managers of the Balkans, Belgrade; Printed by: SKRIPTA International, Belgrade, ISBN 978-86-80194-27-1, ISSN 2683-6149, DOI:



This paper aims to analyze whether the financial markets of the LAC Region converge towards
integration in the post-global financial crisis period. The purpose of this analysis is to provide
answers to two questions, namely, whether Latin American financial markets have increased their
convergence as a result of the global financial crisis? If so, could portfolio diversification be called
into question? The results suggest that after the 2008 financial crisis, Latin American financial markets
showed a higher rate of convergence, measured by the correlation between regional market yields.
In addition, we found convergence in the coefficient of movements between Latin American financial
markets and the US, using dynamic linear models at the regional level. Specifically, we found consistent
movements in market returns in the LAC Region, and the S&P 500 index, after the financial crisis. In
conclusion, this type of convergence may be a sign of the acceleration of the integration process among
Latin American financial markets, which may hinder portfolio diversification.



Financial integration, Emerging markets, Risk diversification, Dynamic linear models.




Abu-Alkheil, Ahmad, Walayet A. Khan, Bhavik Parikh, and Sunil K. Mohanty. 2016. Quarterly
Review of Economics and Finance Dynamic Co-Integration and Portfolio Diversification
of Islamic and Conventional Indices: Global Evidence. Board of Trustees of the University
of Illinois.
Allen, Franklin, Xian Gu, and Oskar Kowalewski. 2012. “Financial Crisis, Structure and Reform.”
Journal of Banking and Finance.
Alotaibi, Abdullah R., and Anil V. Mishra. 2016. “Time Varying International Financial Integration
for GCC Stock Markets.” The Quarterly Review of Economics and Finance: 1–13.
Bekaert, Geert, Michael Ehrmann, Marcel Fratzscher, and Arnaud Mehl. 2014. “The Global
Crisis and Equity Market Contagion.” Journal of Finance.
Campagnoli, Patrizia et al. 2009. “Dynamic Linear Models.” In Dynamic Linear Models with R.
Campagnoli, Patrizia, Sonia Petrone, and Giovanni Petris. 2009. Dynamic Linear Models with
R Dynamic Linear Models with R.
Chen, Gong-meng, Michael Firth, and Oliver Meng Rui. 2002. “Stock Market Linkages: Evidence
from Latin America.” Journal of Banking & Finance 26(6): 1113–41. http://linkinghub.
Dias, Rui, Jacinto Vidigal da Silva, and Andreia Dionísio. 2019. “Financial Markets of the
LAC Region: Does the Crisis Influence the Financial Integration?” International Review
of Financial Analysis. (April 8, 2019).
Dickey, David, and Wayne Fuller. 1981. “Likelihood Ratio Statistics for Autoregressive Time
Series with a Unit Root.” Econometrica 49(4): 1057–72.
Gamba-Santamaria, Santiago, Jose Eduardo Gomez-Gonzalez, Jorge Luis Hurtado-Guarin,
and Luis Fernando Melo-Velandia. 2017. “Stock Market Volatility Spillovers: Evidence

for Latin America.” Finance Research Letters 20: 207–16.
Grubel, Herbert G. 1968. “Internationally Diversified Portfolios: Welfare Gains and Capital
Flows.” The American Economic Review.
Jouini, Jamel, Jihed Majdoub, and Ines Ben Bouhouch. 2013. Emerging Markets and the Global
Economy: A Handbook Equity Market Comovements Among Selected Emerging Countries
from Long- and Short-Run Perspectives. Elsevier Inc.
King, Mervyn, Enrique Sentana, and Sushil Wadhwani. 2006. “Volatility and Links between
National Stock Markets.” Econometrica.
Kwiatkowski, Denis, Peter C. B. Phillips, Peter Schmidt, and Yongcheol Shinb. 1992. “Testing
the Null Hypothesis of Stationary against the Alternative of a Unit Root.” Journal of
econometrics 54(1): 159–78.
Levy, Haim, and Marshall Sarnat. 1970. “International Diversification of Investment Portfolios.”
American Economic Review.
Lütkepohl, Helmut, and Markus Krätzig. 2004. Applied Time Series Econometrics Applied
Time Series Econometrics.
Melo, Luis Fernando, and Hernán Rincón. 2013. “Choques Externos y Precios de Los Activos
En Latinoamérica Antes y Después de La Quiebra de Lehman Brothers.” Ensayos Sobre
Politica Economica.
Noman, Abdullah M, and M Zillur Rahman. 2010. “Stationarity of South Asian Real Exchange
Rates Under Exponential Star (ESTAR) Framework.” The Journal of Developing Areas
43(2): 41–50.
Petris, Giovanni. 2010. “An R Package for Dynamic Linear Models.” Journal of Statistical
Said, Said E., and David A. Dickey. 1984. “Testing for Unit Roots in Autoregressive Moving
Average Models of Unknown Order.” Biometrika 71(3): 599–607.
Sakthivel, P., Naresh Bodkhe, and B. Kamaiah. 2012. “Correlation and Volatility Transmission
across International Stock Markets: A Bivariate GARCH Analysis.” International Journal
of Economics and Finance.
Solnik, Bruno, Cyril Boucrelle, and Yann Le Fur. 1996. “International Market Correlation and
Volatility.” Financial Analysts Journal.
Steiger, James H. 1980. “Tests for Comparing Elements of a Correlation Matrix.” Psychological
Weber, Enzo. 2013. “Simultaneous Stochastic Volatility Transmission across American Equity
Markets.” Quarterly Review of Economics and Finance.


Download Full Paper




Association of Economists and Managers of the Balkans – UdEkoM Balkan
179 Ustanicka St, 11000 Belgrade, Republic of Serbia

LIMEN conference publications are licensed under a Creative Commons Attribution-NonCommercial 4.0 International License.