Volatility dependence structure between the Mexican stock exchange and the world capital market

• Autores: Francisco López Herrera, Roberto J. Santillán Salgado, Salvador Cruz Aké
• Localización: Investigación económica, ISSN 0185-1667, Vol. 74, Nº. 293, 2015, págs. 69-97
• Idioma: inglés
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• Resumen

  • This paper studies the integration of the Mexican Stock Exchange (MSE) into the World Capital Market (WCM). We detect a long-run equilibrium relationship, despite the effects of structural breaks associated to different financial crises during our period of analysis (1987-2012). The analytical approach begins with the estimation of a bivariate VECM in the mean, including several dummy variables that capture the main crisis episodes that took place during the estimation period. Next, we specify a VARMA-GARCH model with Dynamic Conditional Correlation, and, finally, we fit a Clayton copula to returns, conditional on two volatility regimes (low and high), in order to further understand the nature of their dependence structure.