Research On The Linkage Of Stock Markets In Latin America Pacific Alliance

Under the great tide of economic globalization and financial liberalization,economic and trade cooperation between countries has deepened,capital markets have become increasingly connected,and international cross-border capital flows have become more active,which has led to a growing linkage between national stock markets.As an important driving force for the development of the global economy,emerging markets have great potential for development and are favored by investors from all over the world.The Latin American Pacific Alliance is a sub-regional organization with outstanding performance in Latin America.Its consists of Chile,Colombia,Mexico,and Peru.These countries are emerging economies.Since its establishment,it has made certain achievements in trade and investment liberalization and financial integration.Trade and financial exchanges between member states have become closer,cross-border capital flows have become more frequent,and the links between its stock markets have become increasingly close.The future of the alliance is expected to have an important impact on the pattern of world economic and regional cooperation.Based on this background,this paper takes the Latin American Pacific Alliance member countries as the research object and studies its stock market linkage.First of all,the concept of linkage is defined.It is clear that this paper study the linkage between national stock market indices.Secondly,on the basis of relevant theories and transmission paths,the current situation and linkage of stock market in Latin American Pacific Alliance member countries are analyzed.The impact of economic globalization and cross-border capital flows,the influence of foreign trade relations among member countries and the similarity of economic structure and policies are the influencing factors of the stock market linkage.Thirdly,the data of the Chilean IPSA index,the Colombian COLCAP index,the Mexican MXX index,and the Peruvian LIMA index from 2008 to 2018 are selected.The VAR model and the DCC-GARCH model are used to quantitatively analyze the stock market linkage of the Latin American Pacific Alliance member countries.The establishment of the Latin American Pacific Alliance in 2011 and the integration of the Mexican stock market into the Latin American Integration Market(MILA)in 2014 as a time node,the sample interval is divided into three phases,whether the major positive events will cause linkages among the stock markets of member countries.According to the theoretical combing and empirical research of the previous article,the following conclusions are drawn.First,there is strong linkage between the stock markets of member countries of the Latin American Pacific Alliance.Second,this linkage is asymmetric,that is,the fluctuations in the stock markets of Chile,Colombia,and Mexico will cause fluctuations in the Peruvian stock market,while the fluctuations in the Peruvian stock market will have a weaker impact on the stock markets of the other three countries.Third,major positive events will strengthen the linkage between the stock markets of the member countries of the Latin American Pacific Alliance.This paper proposes reasonable suggestions for the stock market risk prevention and supervision of the member states of the Union and the rational allocation of international assets by the international investors,and provides reasonable suggestions for China's future economic,trade and investment cooperation with Latin American countries and emerging economies.