Are emerging equity markets responsive to cross-country macroeconomic movements?

In this study, we examine the response of Latin American stock markets to movements in cross-country Latin American macroeconomic variables. We find little evidence that Latin American stock markets are responsive to these changes. Alternatively, we find that Mexico's stock market affects other Latin American stock markets but not vice-versa. We also find that the exchange rate of a Latin American country affects its own stock market, suggesting that currency risk is an important source of risk in Latin America. We conclude that the use of cross-country macroeconomic variables is not very useful for forecasting Latin American stock market movements.