Cointegration trends among the NAFTA equity markets

Recent economic and financial liberalization policies have increased the
internationalization of emerging markets. A daring strategy undertaken by
Mexico constituted the North America Free Trade Agreement (NAFTA); in
addition to increased trade and investments, it should have led to stronger links
among the equity markets from Canada, United States and Mexico. This study
tests a “first generation” financial integration among those markets, applying
Johansen’s cointegration technique. It also examines integration between the
NAFTA markets and the world capital market. Results evidence a time-varying
integration process among NAFTA equity markets. Integration of the NAFTA
capital markets to the world capital market evidences a mild segmentation and
a time-varying integration as well.
Francisco López-Herrera
Edgar Ortiz
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