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Market Reaction and Volatility in the Brazilian Stock Market

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Author Info

  • 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.

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Bibliographic Info

Paper provided by EconWPA in its series Finance with number 0412020.

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Length: 13 pages
Date of creation: 15 Dec 2004
Date of revision:
Handle: RePEc:wpa:wuwpfi:0412020

Note: Type of Document - pdf; pages: 13
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Web page: http://128.118.178.162

Related research

Keywords: Brazilian stock market; event study; market reaction; GARCH;

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References

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  1. Miller, Merton H & Rock, Kevin, 1985. " Dividend Policy under Asymmetric Information," Journal of Finance, American Finance Association, vol. 40(4), pages 1031-51, September.
  2. Myers, Stewart C. & Majluf, Nicolás S., 1945-, 1984. "Corporate financing and investment decisions when firms have information that investors do not have," Working papers 1523-84., Massachusetts Institute of Technology (MIT), Sloan School of Management.
  3. Asquith, Paul & Mullins, David Jr., 1986. "Equity issues and offering dilution," Journal of Financial Economics, Elsevier, vol. 15(1-2), pages 61-89.
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  15. White, Halbert, 1980. "A Heteroskedasticity-Consistent Covariance Matrix Estimator and a Direct Test for Heteroskedasticity," Econometrica, Econometric Society, vol. 48(4), pages 817-38, May.
  16. Akgiray, Vedat, 1989. "Conditional Heteroscedasticity in Time Series of Stock Returns: Evidence and Forecasts," The Journal of Business, University of Chicago Press, vol. 62(1), pages 55-80, January.
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  18. A. Craig MacKinlay, 1997. "Event Studies in Economics and Finance," Journal of Economic Literature, American Economic Association, vol. 35(1), pages 13-39, March.
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