حرکت مشترک بازارهای سهام در آمریکا و آمریکای لاتین قبل و بعد از بحران 1987

We examine the stability of correlations and the benefits of international portfolio diversification through investment in Argentina, Brazil, Chile and Mexico, the four largest Latin American markets, from the point of view of a U.S. investor. Three 44-month periods are examined characterized by closed markets (February 1984–September 1987, Period I), opening initiatives (November 1987–June 1991, Period II), and open markets with large portfolio inflows (July 1991–February 1995, Period III). The 1987 market crash is used as a break point because it was the only event before 1995 to have affected many emerging markets simultaneously. Our findings indicate that correlations are rising in time and that there are no significant gains to a domestically well diversified U.S. investor from holding a well diversified portfolio of Latin stocks in the most recent sample periods. Investment in Latin America probably should be made through a careful selection of countries and securities instead of the purchasing of a broad index of Latin American stocks.

Low correlations between the world's equity markets indicate that investors may gain from international diversification (see, e.g., Lessard, 1976, Levy & Sarnat, 1970, Meric & Meric, 1989, Solnik, 1974 and Watson, 1978). Several recent studies (e.g., Arshanapalli & Doukas, 1993, Lee & Kim, 1993, McInish & Lau, 1993, Meric & Meric, 1997 and Meric & Meric, 1998) show that the correlations between the world's equity markets have increased substantially and that the benefits of international diversification may have considerably decreased since the 1987 crash. However, gains from international portfolio diversification do not depend solely on correlations. Although increasing worldwide correlations would diminish the benefits of international diversification, regime changes (such as financial liberalization) may reduce market risk and increase expected returns, potentially offsetting the effects of greater correlations. Emerging equity markets have received considerable attention in recent years because of their high returns and their low correlation with developed equity markets (see, e.g., Aggarwal et al., 1999, Aggarwal & Leal, 1997, DeFusco et al., 1996, Divecha et al., 1992, Harvey, 1995, Meric et al., 2001, Meric et al., 2000, Meric et al., 1998, Mullin, 1993 and Ratner & Leal, 1996). Goodhart (1988), Hamao, Masulis, and Ng (1990), King and Wadhwani (1990), Malliaris and Urrutia (1992), and Roll (1988) document a significant increase in the correlation between national equity market movements during the 1987 international equity market crash. Although the effects of the October 1987 international equity market crash on the developed national equity markets has been studied extensively, its effect on the correlations between the emerging markets and between the emerging markets and the developed equity markets has not been studied sufficiently. The objective of this paper is to study the equity market co-movements of the U.S., Argentina, Brazil, Chile, and Mexico before and after the 1987 international equity market crash and examine the impact on the gains of international portfolio diversification in Latin America. The reason to use the crash of 1987 as a watershed is that it is the only worldwide event identified by Aggarwal et al. (1999) affecting many different emerging stock markets. We verify that correlations between these five equity markets increased and the benefits of diversification decreased after the crash. If correlations have increased, the weights of Latin American stock markets in U.S. investors portfolios may decrease unless their estimate of market risk is lower and their expected returns are attractive. The paper is organized as follows: Section 2 describes our data and methodology. Section 3 studies the correlation coefficients of the five equity markets before and after the 1987 crash. In Section 4, principal components analysis (PCA) is used to study the changes in the co-movement patterns of the five equity markets from the precrash period to the postcrash period and during the postcrash period. In Section 5, Box's M statistic is used to study the intertemporal stability of the variance–covariance matrix of the equity market index returns. Section 6 presents our analysis of the portfolio weights of the Latin American stock markets in the three subperiods studied. Our findings are summarized and conclusions are presented in Section 7.

Low correlations among national equity markets are often presented as evidence in support of the benefits of international portfolio diversification. Due to high correlations between the developed equity markets, international investors have turned their attention to the emerging markets to obtain greater portfolio diversification benefits. In this study, we have found that the correlation between the U.S., Argentine, Brazilian, Chilean, and Mexican equity markets has increased and the benefits of portfolio diversification with these equity markets have decreased considerably during the February 1984–February 1995 period. Our analysis considers only the risk-reducing benefits of international portfolio diversification. However, returns are also important in international portfolio investment decisions. The implication of our findings is that U.S. investors should require higher returns from their investments in the Latin American equity markets to be compensated for the decreasing portfolio diversification benefits with these markets over time. It is also possible that the market risk has been reduced in these markets after the opening and liberalization processes that took place. In a recent study, Meric and Meric (1997) find that average correlation between the U.S. and the 12 largest European equity markets was .5 during the November 1987–February 1994 period. This statistic compares with .114 for the November 1987–June 1991 period and .299 for the July 1991–February 1995 period for the U.S. and the four largest Latin American equity markets analyzed in this study. Although the correlations with the Latin American equity markets appear to be increasing over time, these markets still could provide greater diversification benefits to U.S. investors compared with the other developed equity markets. However, when we used previous period portfolio weights as an ex ante asset allocation between the U.S. and the Latin American markets, we did not obtain a significant improvement over a 100% U.S. stock strategy. Since ex ante portfolio decisions are based on the ex ante co-movement observations of international equity markets, intertemporal stability in the co-movement patterns of the markets is an important field of study in finance. Although intertemporal stability in the co-movements of the developed equity markets has been studied extensively, intertemporal stability in the co-movements of the emerging equity markets has received little attention. Aggarwal and Leal (1997), Bekaert and Harvey (1997), Erb, Harvey, and Viskanta, (1995), and Meric et al., 2000 and Meric et al., 2001 present evidence that correlations with the emerging markets are not stable over time and that they increase in times of high volatility. In this study, we have also found significant changes and instability in the co-movement patterns of the U.S. and the four largest Latin American equity markets during the February 1984–February 1995 period. Our findings imply that it may be difficult for U.S. investors to make good ex ante portfolio diversification decisions and predict future diversification benefits based on the ex post co-movement information from the Latin American emerging equity markets.