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Market Reaction and Volatility in the Brazilian Stock Market

Author

Listed:
  • Otavio Ribeiro De Medeiros

    (Universidade de Brasilia, Brazil)

  • Alberto Shigueru Matsumoto

    (Fundacao Visconde de Cairu, Brazil)

Abstract

We perform an event study to investigate stock returns associated to the announcement of equity issues by Brazilian firms between 1992 and 2003 aiming to determine the market reaction before, during, and after the issue announcement. After measuring abnormal returns by OLS, we used ARCH and GARCH models over 70% of the sample. The results show signs of insider information, negative abnormal returns around the announcement, and persistent negative abnormal returns in the long-term after the issue. The results are consistent with the extant empirical literature and show that ARCH/GARCH estimation of abnormal returns is superior to OLS estimation.

Suggested Citation

  • Otavio Ribeiro De Medeiros & Alberto Shigueru Matsumoto, 2004. "Market Reaction and Volatility in the Brazilian Stock Market," Finance 0412020, University Library of Munich, Germany.
    • Handle: RePEc:wpa:wuwpfi:0412020
    Note: Type of Document - pdf; pages: 13
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    File URL: https://econwpa.ub.uni-muenchen.de/econ-wp/fin/papers/0412/0412020.pdf
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    References listed on IDEAS

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    More about this item

    Keywords

    Brazilian stock market; event study; market reaction; GARCH;
    All these keywords.

    JEL classification:

    • G - Financial Economics

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