This research employs the multivariate
autoregressive moving average-generalized autoregressive conditionally
heteroscedastic-dynamic equicorrelation (ARMA-GARCH-DECO) model to identify
contagion among Latin American financial markets during financial turmoil
period. We analyze the dynamic conditional correlations among 18 American
Depositary Receipts (ADR), 8 Exchange Traded Funds (ETF) and 6 Foreign Exchange
Rates (Forex). Our sample includes daily closing prices from April 1, 2014, to
January 29, 2021, for Argentina, Brazil, Chile, Colombia, Mexico, and Peru.
Results find long-run properties in the volatility of most instruments
including those belonging to defensive super sector implying that defensive
super sector and basic materials are the most impacted sectors during the last
financial crises. We present evidence that in times of economic disruption like
in the midst of the COVID-19 pandemic, those financial assets do not act as
safe harbor investments since they are relatively more correlated during period
of financial crises than in normal periods. Our findings have policy
implications and are of interest to practitioners who look a better
understanding of the dynamics of spillovers among the behavior of emerging
JEL classification numbers: C58, D53, G15.
Keywords: Dynamic equicorrelation model, Latin America, American
Depositary Receipts, Exchange Traded Funds, Foreign Exchange Rates, ARMA-GARCH.