Hortense Santos – Escola Superior de Ciências Empresarias – Instituto Politécnico de Setúbal, Portugal
Rui Dias – Escola Superior de Ciências Empresarias – Instituto Politécnico de Setúbal, Portugal & CEFAGE, Universidade de Évora, Portugal
Paula Heliodoro – Escola Superior de Ciências Empresarias – Instituto Politécnico de Setúbal, Portugal
Paulo Alexandre – Escola Superior de Ciências Empresarias – Instituto Politécnico de Setúbal, Portugal
DOI: https://doi.org/10.31410/ITEMA.2020.91
4th International Scientific Conference on Recent Advances in Information Technology, Tourism, Economics, Management and Agriculture – ITEMA 2020, Online/virtual, October 8, 2020, CONFERENCE PROCEEDINGS published by the Association of Economists and Managers of the Balkans, Belgrade; Printed by: SKRIPTA International, Belgrade, ISBN 978-86-80194-36-3, ISSN 2683-5991, DOI: https://doi.org/10.31410/ITEMA.2020
Abstract
The new coronavirus disease (Covid-19) evolved quickly from a regional health outbreak to a global collapse, stopping the global economy in a unprecedented way, creating uncertainty and chaos in the financial markets. Based on these events, it is intended in this paper to test the persistence of profitability in the financial markets of Argentina, Brazil, Chile, Colombia, Peru and Mexico, in the period between January 2018 to July 2020. In order to perform this analysis where undertaken different approaches in order to analyze if: (i) the financial markets of Latin America are efficient in their weak-form during the global pandemic (Covid-19)? ii) If so, the persistent long memories cause risks between these regional markets? The results suggest that the returns don’t follow the i.i.d. hypothesis, from dimension 2, reinforcing the idea that returns of stock indexes have a non-linear nature or a significant non-linear component, exception made to the Argentina market, which was expected in virtue of the Ljung-Box (with the return squares) test results, and ARCH-LM. Corroborating the exponents Detrended Fluctuation Analysis (DFA), indicate the presence of persistent long memories, namely into the following markets: Colombia (0.72), Chile (0.66), Brazil (0.58) and Peru (0.57). The Argentina market does not reject the random walk hypothesis, while the Mexican market suggests some anti-persistence (0.41). This situation has implications for investors, once that some returns can be expected, creating arbitration opportunities and abnormal income, contrary to the supposed from the random walk hypothesis and information efficiency. The t-test results of the heteroscedasticity form the two samples suggest that there is no risk transmission between these regional markets, with the exception to the BOVESPA / BOLSAA MX markets, that is, the existence of persistent long memories in the returns does not imply the risk transmission between markets. These finds allow the creation of strategies of diversification inefficient portfolios. These conclusions also open space for the market regulators to implement measures that guarantee a better informational information of these regional markets.
Keywords
Covid-19, LAC region, Long memories, Arbitration.
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