1.23. Dynamic Episodic Nonlinearities and Economic Events: The Case of Latin American Financial Markets.

CLAUDIO A. BONILLA, RAFAEL ROMERO-MEZA

ABSTRACT
This study examines economic and political events that could explain episodes of non- linearity detected in major Latin American stock markets. The methodology employed is that of a reverse event study. After applying a bicorrelation test in combination with a windowed test procedure as developed by Hinich (1996) and Hinich and Patterson (2005) to detect non-linear episodes, we investigate the causes of this behavior.

We find that a series of political and economic events are associated with non-linear periods in Latin America, and that no single event leads to contemporaneous non-linearities in all of the region’s markets.

Key words: Hinich portmanteau bicorrelation test, episodic nonlinearity, Latin American stock market, event detection.