A Behavioral Interpretation of Volatility Patterns in Brazilian Stock Market: Analysis of Pre and Post-COVID-19 Periods from 2019 to 2021

Q4 Business, Management and Accounting

International Journal of Business and Management Science Pub Date : 2023-05-26 DOI:10.5539/ijbm.v18n4p24

Roberta Muramatsu, Pedro Raffy Vartanian, Gabriel de Andrade Moraes

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Abstract

There has recently been an increasing number of new investors in the Brazilian stock markets, providing new asset allocation opportunities as well as challenges in terms of individual judgment and decision-making. The departure point of this paper is the conjecture that the Ibovespa (Brazilian stock exchange index) might reveal asymmetric volatility patterns during the January 2019 to February 2021 period that call for behavioral financial explanations. More specifically, this paper aims to subject this bold conjecture to an empirical test. It draws on a threshold autoregressive conditional heteroskedasticity (TARCH) model to investigate the existence of asymmetric reactions in the period under study. Our findings suggest that the traditional approach to finance fails to explain volatility patterns in the Brazilian stock market behavior, since they do not fit well with predictions based on the efficient market hypothesis. Inspired by Vasileiou’s (2021) account of what occurred with the New York Stock Exchange during COVID-19, we then embark on a brief survey of the vast literature on applied behavioral economics and finance to provide an interpretation of the heuristics and biases that may be non-negligible mental mechanisms underlying the Ibovespa’s detected asymmetric responses.

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巴西股市波动模式的行为解读:2019 - 2021年新冠肺炎疫情前后分析

最近，巴西股市的新投资者越来越多，这提供了新的资产配置机会，同时也给个人判断和决策带来了挑战。本文的出发点是Ibovespa(巴西证券交易所指数)可能在2019年1月至2021年2月期间揭示不对称波动模式的猜想，这需要行为金融解释。更具体地说，本文旨在对这一大胆猜想进行实证检验。利用阈值自回归条件异方差(TARCH)模型来研究研究周期内不对称反应的存在性。我们的研究结果表明，传统的金融方法无法解释巴西股市行为的波动模式，因为它们与基于有效市场假设的预测不太吻合。受Vasileiou(2021)对2019冠状病毒病期间纽约证券交易所发生的事情的描述的启发，我们随后对应用行为经济学和金融学的大量文献进行了简要调查，以提供启发式和偏见的解释，这些启发式和偏见可能是Ibovespa检测到的不对称反应背后不可忽视的心理机制。

本文章由计算机程序翻译，如有差异，请以英文原文为准。

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International Journal of Business and Management Science Business, Management and Accounting-Business and International Management

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期刊介绍： The International Journal of Business and Management Science (IJBMS) (Print: ISSN 1837-6614; Online: 1985-692X) is a double-blind peer-reviewed semiannual journal. Generally the journal publishes the articles that expand knowledge on business and management issues. Business Complexity and Performance Management were the two of the top ten problems IJBMS cover pageof 20th century management. In the 21st century, overcoming such problems seem to be challenging to educators and practitioners. Do educators and practitioners agree on which management skills are required for success in the 21st century? These all issues call for substantial research to achieve a very modern sustainable business era of the global economy. IJBMS intends to focus on the business and management issues with the vision of sustainable competitiveness along with scientific evidences. The quantitative approach for analyzing a research problem is promoted by IJBMS.