Volatility and value creation in the Latin American integrated market

Abstract

In the present day, integration aims to reduce market atomization by concentrating the liquidity and penetration of each of the actors that constitute MILA (Mercado Integrado Latinoamericano) in a single place. This facilitates the incorporation into international capital markets and allows access to financing sources different from traditional funding from banks. For this reason, it is relevant to study the relationship between value creation and the volatility of the firms that are part of MILA for the period from 2007 to 2017. Different econometric models are used, and a negative and statistically significant relationship is evidenced between shareholder value creation and volatility. This implies that the companies that generate greater uncertainty, reflected in higher volatility, (measured in terms of daily returns) exhibit lower value creation for the shareholder.