Return and volatility connectedness among US and Latin American markets: A QVAR approach with implications for hedging and portfolio diversification

This study examines return and volatility connectedness among major Latin American markets and the US using the Quantile Vector Autoregression (QVAR) approach. We analyze spillovers at the median and extreme tails. Results reveal moderate integration at the median, with higher interconnectedness at both tails. We find that volatility spillovers are slightly greater at right tails, and spillovers peaked during the 2008 Global Financial Crisis. Return spillovers generally exceed volatility spillovers. Argentina and Chile are net receivers, while Brazil, Mexico, and the US are net transmitters. Based on the Minimum Connectedness Portfolio and the dynamic hedge ratio, Chile offers the cheapest hedge, while US is the most effective for risk reduction.