Short-term and long-term linkages among the Colombian capital market indexes

Arbelaez, Harvey; Urrutia, Jorge; Abbas, Nidal
September 2001
International Review of Financial Analysis;Sep2001, Vol. 10 Issue 3, p237
Academic Journal
Emerging capital markets are complex and interesting. Colombia's capital, although thin and small, is not the exception. A major restructuring underway makes this market more appealing to study. In effect, the three Colombian exchanges just merged into one, the "Bolsa de Colombia." The purpose of this paper is to empirically examine the short-term and long-term linkages among the several stock indices of the former Medellin Stock Exchange, traditionally the most important equity market of Colombia. To answer relevant questions such as Do these indices behave similarly? Do they influence each other? Which is the direction of causality? How strongly do these indices respond?, etc., a methodology that includes tests of stationarity, causality, cointegration, impulse response and variance decomposition is used as well as a VEC model to a data set that covers daily prices from January 2, 1988 through August 9, 1994. The empirical findings reported might also be valid for other emerging markets around the world. Copy 2001 Elsevier Science Inc. All rights reserved.


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