In the past two decades the Latin American region has experienced a number of credit crises stemming from large sovereign debt levels and sharp currency devaluations. This study aims to discover whether or not the sovereign credit default swaps (CDS) in the Latin American region lead equity markets prior to these sovereign credit events. Through a sample of the seven largest Latin American economies and daily return data from 2001 to 2018, I try to empirically test this question through a Generalized Least Squared model. The paper finds little significant evidence of CDS leading equity markets in price discovery prior to sovereign credit events. Additionally, the paper observes a potential momentum effect present amongst Latin American equity market returns. However, this effect is more likely serial correlation amongst equity market returns due to the illiquidity of these equity markets.
| Identifer | oai:union.ndltd.org:CLAREMONT/oai:scholarship.claremont.edu:cmc_theses-3142 |
| Date | 01 January 2019 |
| Creators | Aguilar, Patricio |
| Publisher | Scholarship @ Claremont |
| Source Sets | Claremont Colleges |
| Detected Language | English |
| Type | text |
| Format | application/pdf |
| Source | CMC Senior Theses |
| Rights | 2018 Patricio Aguilar, default |
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