Stochastic trends in stock prices: Evidence from Latin American markets

This paper investigates the long-run relationship between stock indices from six Latin American markets and the United States. The empirical investigation is conducted using weekly data from January 1989 to December 1993, unit root tests, cointegration tests, and error-correction models. Results from the unit root tests provide evidence of a stochastic trend in all indices. Results from the cointegration tests indicate the presence of a long-run relationship between the six Latin American indices (with and without the United States index). Error-correction results indicate significant causality among the stated indices.