Changes in country risk rating: Do they affect the volatility of emerging markets?

Case: MILA, CIVETS and BM and FBOVESPA

Keywords: credit rating, emerging economies, structural change, copulas

Abstract

The integration of the stock markets creates relationships through agreements that provide greater economic benefits to the countries and offer investors more opportunities to invest their capital surpluses based on expected profitability and risk diversification. It is then that the country risk becomes an indicator for decision making, since the risk rating agencies evaluate the existing conditions in an economy and its links with others. Therefore, the purpose of this paper is to assess the impact of the change in country risk rating on the prices of equity investment assets in the BM and FBOVESPA-MILA-CIVETS markets in the 2009-2018 period. The foregoing, carried out through a model based on structural change aimed at analyzing whether a break in the time series is identified on the dates of the event. In addition, using Gaussian copulas, the correlation between the risk rating and the average expected returns in different scenarios is verified. The result this generates is that there is an impact and a structural break in the time series of the emerging markets studied, derived from the change in rating; however, when the emerging market has greater depth and volatility, greater significance is identified in the event.

Author Biographies

Daniela Pérez Noreña, Universidad de Antioquia

Magíster en Finanzas. Contadora Pública. Profesora de cátedra del Departamento de Ciencias Contables de la Universidad de Antioquia, Medellín, Colombia.

Daniel Fernando Giraldo Osorio, Universidad de Antioquia

Magíster en Finanzas. Ingeniero Financiero. Universidad de Antioquia, Medellín, Colombia.

Belky Esperanza Gutiérrez Castañeda, Universidad de Antioquia

Doctora en Ciencias Contables. Contadora Pública. Profesora del Departamento de Ciencias Contables de la Universidad de Antioquia, Medellín, Colombia. 

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Author Biographies

Daniela Pérez Noreña, Universidad de Antioquia

Magíster en Finanzas. Contadora Pública. Profesora de cátedra del Departamento de Ciencias Contables de la Universidad de Antioquia, Medellín, Colombia.

Daniel Fernando Giraldo Osorio, Universidad de Antioquia

Magíster en Finanzas. Ingeniero Financiero. Universidad de Antioquia, Medellín, Colombia.

Belky Esperanza Gutiérrez Castañeda, Universidad de Antioquia

Doctora en Ciencias Contables. Contadora Pública. Profesora del Departamento de Ciencias Contables de la Universidad de Antioquia, Medellín, Colombia. 

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How to Cite
Pérez Noreña, D., Giraldo Osorio, D. F., & Gutiérrez Castañeda, B. E. (2022). Changes in country risk rating: Do they affect the volatility of emerging markets? Case: MILA, CIVETS and BM and FBOVESPA. Revista Facultad De Ciencias Económicas, 30(1), 189–214. https://doi.org/10.18359/rfce.5660
Published
2022-06-30
Section
Artículos

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