ISSN 0798 1015
ISSN 0798 1015
Vol. 39 (Nº 44) Año 2018. Pág. 10
Oscar DE LA TORRE-TORRE 1S; José ÁLVAREZ-GARCÍA 2; Evaristo GALEANA-FIGUEROA 3
Recibido: 05/05/2018 • Aprobado: 20/06/2018
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ABSTRACT: In the present paper we use a two-regime Markov-switching model to characterize the weekly performance of the MSCI Latin America, MSCI Emerging markets, MSCI North America and the Venezuelan IBC stock indexes. Our results show that the Latin American portfolio (ex Venezuela) is the bets investment option in normal and distress periods than the North American and Emerging markets ones. The Venezuelan index shows an atypical high profitability and mean-variance efficiency in distress periods that needs further review. |
RESUMEN: En el presente artículo se utiliza un modelo markoviano de cambio de régimen con dos estados para medir el desempeño semanal de los índices MSCI Latinoamérica, MSCI mercados emergentes, MSCI Norteamerica e IBC venezolano. Nuestros resultados demuestran que el portafolio latinoamericano (sin Venezuela) es la mejor opción, en comparación al caso norteamericano y de economías emergentes. En nuestros resultados el índice venezolano presenta rendimientos y una eficiencia media-varianza atípicamente altos en periodos de crisis, resultado que requiere una mayor revisión. |
In the present paper we characterized the performance of the main (local currency measured) Venezuelan stock market index along with the index of the main Latin American and emerging economies stock markets in contrast with the North American (U.S. and Canada). By using a Gaussian two-regime Markov-Switching model to filter the weekly historical data, we found that the Venezuelan, Latin-American, North-American and Emerging markets stock indexes have a better modeling with a two-regime stochastic process where the low volatility (high standard deviation) regime is considered the “normal” or “good-performing” time period in the analyzed financial market, and the high volatility one is proper of a “distress” of “bad-performing” state of nature.
An interesting feature that we found is the fact is that the behavior of the Venezuelan stock market in the bad-performing time periods is dominated by several positive extreme returns, a situation that we relate with the effect that the high inflation levels have in the real returns of this market. An issue that we suggest to review more deeply in future research, along with a performance review in a USD or other foreign non-Venezuelan currency basis.
Among the main findings of our paper is the risk-return profile (measured with the Sharpe ratio without risk-free asset) of the Latin-American stock index that has a better risk and return profile than the hole emerging markets case. We found valid this conclusion for normal and distress time periods (the model detected properly the influence of the financial crisis of 2007-2008 and the European debt crisis of 2011-2013).
Finally, we found that the risk-return profile of the Latin-American markets (modeled with the MSCI Latin America that excludes Venezuela) is almost similar to the North-American ones (U.S. and Canada).
Among the suggestions for future research we suggest to compare the performance of this indexes in a USD or EUR based investor perspective, along with another likelihood function for the Markov-Switching model, such as the Student-t case.
We hope this test is useful to determine the appropriateness of investing in Latin-American markets (as a hole in a single diversified portfolio), in comparison to the performance achieved in a portfolio diversified either in the main emerging economies or the North American ones. Also, we hope to give more insights about the actual Venezuelan stock markets and their economies, in order to find a sustainable long-term growth and prosperity for Venezuela and Latin America.
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1. Full-time professor at the Accounting and Management Sciences Faculty of Michoacan State University, Morelia (Mexico). oscar.delatorre.torres@gmail.com
2. PhD in Direction and Planning of Tourism (University of Vigo). Associate Professor and Researcher at the Department of Financial Economics and Accounting. University of Extremadura, Cáceres (Spain). Email: pepealvarez@unex.es
3. Full-time professor at the Accounting and Management Sciences Faculty of Michoacan State University, Morelia (Mexico). e_galeana@hotmail.com