Does the expansion of Spanish firms into South America affect the price relations between the US and the Spanish stock markets?

Abstract

This paper analyses whether Spanish multinational firms' concentration of activity abroad in South America has an effect on stock price relations between the US and the Spanish stock markets. In order to detect the effect of information that could affect both stock markets simultaneously, we study the stock price relations of both stock markets in their overlapping trading period. We use the Kofman and Martens (1997) methodology to construct a measure of the stock price relations between each Spanish stock and the US stock market. We find stock prices of Spanish firms with American activity to have a higher positive relation with US stock market prices than other Spanish stocks have. We repeat the analysis without the Spanish stocks quoted on the NYSE, and with only those stocks, to take into account the possibility that these stocks move like the US stock market just because they are listed there, and we get the same results. Our hypothesis is that this is due to regional factors that affect stock prices of firms with business in the Americas.