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Evidence of inefficiency of the Brazilian stock market: The IBOVESPA future contracts

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  • Rocha Filho, Tareísio M.
  • Rocha, Paulo M.M.

Abstract

We present some indications of inefficiency of the Brazilian stock market based on the existence of strong long-time cross-correlations with foreign markets and indices. Our results show a strong dependence on foreign markets indices as the S&P 500 and CAC 40, but not to the Shanghai SSE 180, indicating an intricate interdependence. We also show that the distribution of log-returns of the Brazilian BOVESPA index has a discrete fat tail in the time scale of a day, which is also a deviation of what is expected of an efficient equilibrated market. As a final argument of the inefficiency of the Brazilian stock market, we use a neural network approach to forecast the direction of movement of the value of the IBOVESPA future contracts, with an accuracy allowing financial returns over passive strategies.

Suggested Citation

  • Rocha Filho, Tareísio M. & Rocha, Paulo M.M., 2020. "Evidence of inefficiency of the Brazilian stock market: The IBOVESPA future contracts," Physica A: Statistical Mechanics and its Applications, Elsevier, vol. 543(C).
    • Handle: RePEc:eee:phsmap:v:543:y:2020:i:c:s0378437119317996
    DOI: 10.1016/j.physa.2019.123200
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    References listed on IDEAS

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    2. Luiz G. A. Alves & Higor Y. D. Sigaki & Matjaz Perc & Haroldo V. Ribeiro, 2020. "Collective dynamics of stock market efficiency," Papers 2011.14809, arXiv.org.

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