IDEAS home Printed from https://ideas.repec.org/a/aft/journl/v1722020janjunp115-145.html
   My bibliography  Save this article

Interrelationships Between The Stock Returns Of Brazilian Companies That Make Up The Sãƒo Paulo Stock Exchange Index

Author

Listed:
  • Edson Zambon Monte

    (Universidade Federal do Espírito Santo (UFES))

  • Felipe Fantin Almeida

    (Universidade Federal do Espírito Santo (UFES))

Abstract

The objective of this paper was to verify the interrelationships between the stock returns of 33 Brazilian companies that make up the São Paulo Stock Exchange Index (IBOVESPA), from January 2006 to June 2018, using the principal components analysis (PCA), applied on the residuals of the VAR-GARCH model. In general, the results of this study revealed the presence of interrelation between the stock returns which compose the IBOVESPA, and that the interdependence and the correlation pattern vary over time, which can directly impact the investment decisions of economic and financial agents, especially concerning the diversification of their asset portfolios.

Suggested Citation

  • Edson Zambon Monte & Felipe Fantin Almeida, 2020. "Interrelationships Between The Stock Returns Of Brazilian Companies That Make Up The Sãƒo Paulo Stock Exchange Index," Revista de Economia Mackenzie (REM), Mackenzie Presbyterian University, Social and Applied Sciences Center, vol. 17(1), pages 115-145, January-J.
    • Handle: RePEc:aft:journl:v:17:2:2020:jan:jun:p:115-145
    DOI: 105935/1808-2785/rem.v17n1p.115-145
    as

    Download full text from publisher

    File URL: http://editorarevistas.mackenzie.br/index.php/rem/article/view/13122
    Download Restriction: no
    File URL: https://libkey.io/105935/1808-2785/rem.v17n1p.115-145?utm_source=ideas
    LibKey link: if access is restricted and if your library uses this service, LibKey will redirect you to where you can use your library subscription to access this item
    ---><---

    References listed on IDEAS

    as
    1. Paolo Mauro & Nathan Sussman & Yishay Yafeh, 2002. "Emerging Market Spreads: Then versus Now," The Quarterly Journal of Economics, President and Fellows of Harvard College, vol. 117(2), pages 695-733.
    2. Monica Billio & Michael Donadelli & Antonio Paradiso & Max Riedel, 2015. "Measuring Financial Integration: Lessons from the Correlation," Working Papers 2015:23, Department of Economics, University of Venice "Ca' Foscari".
    3. Yu-Pin Hu & Ruey S. Tsay, 2014. "Principal Volatility Component Analysis," Journal of Business & Economic Statistics, Taylor & Francis Journals, vol. 32(2), pages 153-164, April.
    4. Dickey, David A & Fuller, Wayne A, 1981. "Likelihood Ratio Statistics for Autoregressive Time Series with a Unit Root," Econometrica, Econometric Society, vol. 49(4), pages 1057-1072, June.
    5. Luc Bauwens & Sébastien Laurent & Jeroen V. K. Rombouts, 2006. "Multivariate GARCH models: a survey," Journal of Applied Econometrics, John Wiley & Sons, Ltd., vol. 21(1), pages 79-109, January.
    6. Chiang, Thomas C. & Jeon, Bang Nam & Li, Huimin, 2007. "Dynamic correlation analysis of financial contagion: Evidence from Asian markets," Journal of International Money and Finance, Elsevier, vol. 26(7), pages 1206-1228, November.
    7. Volosovych, Vadym, 2011. "Measuring financial market integration over the long run: Is there a U-shape?," Journal of International Money and Finance, Elsevier, vol. 30(7), pages 1535-1561.
    8. Adler, Michael & Dumas, Bernard, 1983. "International Portfolio Choice and Corporation Finance: A Synthesis," Journal of Finance, American Finance Association, vol. 38(3), pages 925-984, June.
    9. Y. -P. Hu & L. Lin & J. -W. Kao, 2008. "Time-varying inter-market linkage of international stock markets," Applied Economics, Taylor & Francis Journals, vol. 40(19), pages 2501-2507.
    10. Li, Baibing & Martin, Elaine B. & Morris, A. Julian, 2002. "On principal component analysis in L1," Computational Statistics & Data Analysis, Elsevier, vol. 40(3), pages 471-474, September.
    11. Nunes, Maurício S. & Jr., Newton C. A. da Costa & Meurer, Roberto, 2005. "A Relação entre o Mercado de Ações e as Variáveis Macroeconômicas: Uma Análise Econométrica para o Brasil," Revista Brasileira de Economia - RBE, EPGE Brazilian School of Economics and Finance - FGV EPGE (Brazil), vol. 59(4), October.
    12. Padmanabhan, Divya & Sinha, Ayan & Venkataraman, Arundhati & Ravi, Archi & Joshi, Apurva, 2015. "Comparative analysis of the stock markets of China, Russia, Brazil, South Africa and Argentina," MPRA Paper 63440, University Library of Munich, Germany, revised 29 Mar 2015.
    13. Benoit Mandelbrot, 2015. "The Variation of Certain Speculative Prices," World Scientific Book Chapters, in: Anastasios G Malliaris & William T Ziemba (ed.), THE WORLD SCIENTIFIC HANDBOOK OF FUTURES MARKETS, chapter 3, pages 39-78, World Scientific Publishing Co. Pte. Ltd..
    14. Douglas Marcos Ferreira & Leonardo Bornacki De Mattos, 2014. "O Efeito Contágio Da Crise Do Subprimeno Mercado Acionário Brasileiro," Anais do XL Encontro Nacional de Economia [Proceedings of the 40th Brazilian Economics Meeting] 052, ANPEC - Associação Nacional dos Centros de Pós-Graduação em Economia [Brazilian Association of Graduate Programs in Economics].
    15. Gagnon, Joseph E & Unferth, Mark D, 1995. "Is there a world real interest rate?," Journal of International Money and Finance, Elsevier, vol. 14(6), pages 845-855, December.
    16. Bordo, Michael D. & Murshid, Antu Panini, 2006. "Globalization and changing patterns in the international transmission of shocks in financial markets," Journal of International Money and Finance, Elsevier, vol. 25(4), pages 655-674, June.
    17. Tam, Pui Sun, 2014. "A spatial–temporal analysis of East Asian equity market linkages," Journal of Comparative Economics, Elsevier, vol. 42(2), pages 304-327.
    18. Lam, Clifford & Yao, Qiwei, 2012. "Factor modeling for high-dimensional time series: inference for the number of factors," LSE Research Online Documents on Economics 45684, London School of Economics and Political Science, LSE Library.
    19. Engle, Robert F, 1982. "Autoregressive Conditional Heteroscedasticity with Estimates of the Variance of United Kingdom Inflation," Econometrica, Econometric Society, vol. 50(4), pages 987-1007, July.
    Full references (including those not matched with items on IDEAS)

    Most related items

    These are the items that most often cite the same works as this one and are cited by the same works as this one.
    1. Yanan Li & David E. Giles, 2015. "Modelling Volatility Spillover Effects Between Developed Stock Markets and Asian Emerging Stock Markets," International Journal of Finance & Economics, John Wiley & Sons, Ltd., vol. 20(2), pages 155-177, March.
    2. Li, Weiming & Gao, Jing & Li, Kunpeng & Yao, Qiwei, 2016. "Modelling multivariate volatilities via latent common factors," LSE Research Online Documents on Economics 68121, London School of Economics and Political Science, LSE Library.
    3. Ma, Tao & Zhou, Zhou & Antoniou, Constantinos, 2018. "Dynamic factor model for network traffic state forecast," Transportation Research Part B: Methodological, Elsevier, vol. 118(C), pages 281-317.
    4. Bekaert, Geert & Mehl, Arnaud, 2019. "On the global financial market integration “swoosh” and the trilemma," Journal of International Money and Finance, Elsevier, vol. 94(C), pages 227-245.
    5. Remes, Piia, 2013. "Putting a Price on Carbon – Econometric Essays on the European Union Emissions Trading Scheme and its Impacts," Research Reports 62, VATT Institute for Economic Research.
    6. Nico Katzke, 2013. "South African Sector Return Correlations: using DCC and ADCC Multivariate GARCH techniques to uncover the underlying dynamics," Working Papers 17/2013, Stellenbosch University, Department of Economics.
    7. Billio, M. & Donadelli, M. & Paradiso, A. & Riedel, M., 2017. "Which market integration measure?," Journal of Banking & Finance, Elsevier, vol. 76(C), pages 150-174.
    8. Koliai, Lyes, 2016. "Extreme risk modeling: An EVT–pair-copulas approach for financial stress tests," Journal of Banking & Finance, Elsevier, vol. 70(C), pages 1-22.
    9. Carlos Trucíos & Mauricio Zevallos & Luiz K. Hotta & André A. P. Santos, 2019. "Covariance Prediction in Large Portfolio Allocation," Econometrics, MDPI, vol. 7(2), pages 1-24, May.
    10. Rebecca Stuart, 2024. "Measuring stock market integration during the Gold Standard," Cliometrica, Springer;Cliometric Society (Association Francaise de Cliométrie), vol. 18(1), pages 191-220, January.
    11. de Oliveira, Felipe A. & Maia, Sinézio F. & de Jesus, Diego P. & Besarria, Cássio da N., 2018. "Which information matters to market risk spreading in Brazil? Volatility transmission modelling using MGARCH-BEKK, DCC, t-Copulas," The North American Journal of Economics and Finance, Elsevier, vol. 45(C), pages 83-100.
    12. Al-Nassar, Nassar S. & Boubaker, Sabri & Chaibi, Anis & Makram, Beljid, 2023. "In search of hedges and safe havens during the COVID─19 pandemic: Gold versus Bitcoin, oil, and oil uncertainty," The Quarterly Review of Economics and Finance, Elsevier, vol. 90(C), pages 318-332.
    13. Chen, Xiaoyu & Chiang, Thomas C., 2016. "Stock returns and economic forces—An empirical investigation of Chinese markets," Global Finance Journal, Elsevier, vol. 30(C), pages 45-65.
    14. Van Cauwenberge, Annelies & Vancauteren, Mark & Braekers, Roel & Vandemaele, Sigrid, 2019. "International trade, foreign direct investments, and firms’ systemic risk : Evidence from the Netherlands," Economic Modelling, Elsevier, vol. 81(C), pages 361-386.
    15. Das, Suman & Roy, Saikat Sinha, 2023. "Following the leaders? A study of co-movement and volatility spillover in BRICS currencies," Economic Systems, Elsevier, vol. 47(2).
    16. Claudeci Da Silva & Hugo Agudelo Murillo & Joaquim Miguel Couto, 2014. "Early Warning Systems: Análise De Ummodelo Probit De Contágio De Crise Dos Estados Unidos Para O Brasil(2000-2010)," Anais do XL Encontro Nacional de Economia [Proceedings of the 40th Brazilian Economics Meeting] 110, ANPEC - Associação Nacional dos Centros de Pós-Graduação em Economia [Brazilian Association of Graduate Programs in Economics].
    17. Volosovych, Vadym, 2011. "Measuring financial market integration over the long run: Is there a U-shape?," Journal of International Money and Finance, Elsevier, vol. 30(7), pages 1535-1561.
    18. Cristina Amado & Annastiina Silvennoinen & Timo Teräsvirta, 2018. "Models with Multiplicative Decomposition of Conditional Variances and Correlations," CREATES Research Papers 2018-14, Department of Economics and Business Economics, Aarhus University.
    19. Psaradakis, Zacharias & Vávra, Marián, 2014. "On testing for nonlinearity in multivariate time series," Economics Letters, Elsevier, vol. 125(1), pages 1-4.
    20. Kris Boudt & Hong Anh Luu, 2022. "Estimation and decomposition of food price inflation risk," Statistical Methods & Applications, Springer;Società Italiana di Statistica, vol. 31(2), pages 295-319, June.

    More about this item

    Keywords

    Financial market; Brazil; dependent data; principal component analysis; financial econometrics.;
    All these keywords.

    JEL classification:

    • C55 - Mathematical and Quantitative Methods - - Econometric Modeling - - - Large Data Sets: Modeling and Analysis
    • C58 - Mathematical and Quantitative Methods - - Econometric Modeling - - - Financial Econometrics
    • G11 - Financial Economics - - General Financial Markets - - - Portfolio Choice; Investment Decisions

    Statistics

    Access and download statistics

    Corrections

    All material on this site has been provided by the respective publishers and authors. You can help correct errors and omissions. When requesting a correction, please mention this item's handle: RePEc:aft:journl:v:17:2:2020:jan:jun:p:115-145. See general information about how to correct material in RePEc.

    If you have authored this item and are not yet registered with RePEc, we encourage you to do it here. This allows to link your profile to this item. It also allows you to accept potential citations to this item that we are uncertain about.

    If CitEc recognized a bibliographic reference but did not link an item in RePEc to it, you can help with this form .

    If you know of missing items citing this one, you can help us creating those links by adding the relevant references in the same way as above, for each refering item. If you are a registered author of this item, you may also want to check the "citations" tab in your RePEc Author Service profile, as there may be some citations waiting for confirmation.

    For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: Instituto Presbiteriano Mackenzie (IPM) (email available below). General contact details of provider: https://edirc.repec.org/data/fcmacbr.html .

    Please note that corrections may take a couple of weeks to filter through the various RePEc services.

    IDEAS is a RePEc service. RePEc uses bibliographic data supplied by the respective publishers.