Flujos de capital extranjero, volatilidad de los rendimientos, riesgo de mercado mundial, ARCH-GARCH,VAR

Abstract

This study measured the effect of foreign capital flows on volatility and exposure to world market risk in the six largest Latin American stock markets: Argentina, Brazil, Colombia, Chile, Mexico and Peru, from the late 90’s until 2008. This will test whether these flows cause instability for those markets and increase their exposure to international financial crises. Time series models,both univariate (ARCH - GARCH) and multivariate (VAR), are used to estimate the effect foreign portfolio flows on the risk variables and the causality of these effects. Unlike similar research, this study uses the Foreign Funds database of Emerging Portfolio. It should be noted that in most cases there is not strong evidence to support the hypothesis that foreign flows cause instability on the Latin American stock Markets. However, we found evidence of effects of exchange rate appreciation, international returns and foreign flows on stock market returns, like other studies on different emerging markets.