Abstract

PEREZ NORENA, Daniela; GIRALDO OSORIO, Daniel Fernando  and  GUTIERREZ CASTANEDA, Belky Esperanza. Changes in country risk rating: Do they affect the volatility of emerging markets? Case: MILA, CIVETS and BM and FBOVESPA. Rev.fac.cienc.econ. [online]. 2022, vol.30, n.1, pp.189-214.  Epub June 30, 2022. ISSN 0121-6805.  https://doi.org/10.18359/rfce.5660.

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.

Keywords : credit rating; emerging economies; structural change; copulas.

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