EMPIRICAL TEST OF THE EFFICIENCY OF THE BRAZILIAN MARKET IN THE OCCURRENCE OF EVENTS FAVORABLE AND UNFAVORABLE
AbstractThe study has the purpose of analyzing the behavior of the Brazilian stock market in order to verify the existence of market efficiency immediately after the occurrence of favorable and unfavorable events (shocks). To achieve this purpose, an event study is performed in which the return on the Brazilian stock market index (Ibovespa) is regressed against the return on the Dow Jones stock market index, which represents the New York Stock Exchange, adopted as a proxy for the world stock market index. Regression residuals appearing as outliers above +2.5% or below –2.5% were adopted to determine positive and negative events, respectively. Cumulative Abnormal Returns were computed and tested for a period of 10 days after the events. The empirical results led to the conclusion that market efficiency is not observed both after positive and negative shocks, but an overreaction behavior is observed instead.
Key words: economic shocks. Market efficiency. Overreaction. Uncertain information hypothesis. Underreaction. Event study.
Mar 14, 2008
How to Cite
BARBOSA, Glauber de Castro; MEDEIROS, Otávio Ribeiro de. EMPIRICAL TEST OF THE EFFICIENCY OF THE BRAZILIAN MARKET IN THE OCCURRENCE OF EVENTS FAVORABLE AND UNFAVORABLE. Revista de Negócios, [S.l.], v. 12, n. 4, p. 44-54, mar. 2008. ISSN 1980-4431. Available at: <https://proxy.furb.br/ojs/index.php/rn/article/view/638>. Date accessed: 18 oct. 2021. doi: http://dx.doi.org/10.7867/1980-4431.2007v12n4p44-54.
Choques econômicos. Eficiência de mercado. Overreaction. Uncertain information hypothesis. Underreaction. Retorno anormal acumulado (RAA).
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