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The Behaviour of Volatility Components of Brazilian Stocks

Author

Listed:
  • Hudson Chaves Costa

    (Programa de Pós-Graduação em EconomiaUniversidade Federal do Rio Grande do Sul (UFRGS))

  • João Henrique Gonçalves Mazzeu

    (Departamento de EstatísticaUniversidad Carlos III de Madrid)

  • Newton Carneiro Affonso da Costa Jr.

    (Departamento de Economia, Universidade Federal de Santa Catarina (UFSC))

Abstract

The present paper evaluates by approach of Campbell et al. (2001) the evolution of the three volatility components of the Brazilian stocks in the period 1996 to 2010. It is identified that the idiosyncratic component of the volatility does not have the same temporal growth trend in other countries. Instead, it displays a downward trend from the end of the 90’s. Statistical tests were performed to confirm this hypothesis, including structural break test, unit root and trend. The results indicate that the idiosyncratic volatility has structural break and there is no evidence that the trend is stochastic, because when performing deterministic trend tests it appears that there is a statistically significant decrease pattern.

Suggested Citation

  • Hudson Chaves Costa & João Henrique Gonçalves Mazzeu & Newton Carneiro Affonso da Costa Jr., 2016. "The Behaviour of Volatility Components of Brazilian Stocks," Brazilian Review of Finance, Brazilian Society of Finance, vol. 14(2), pages 225-268.
    • Handle: RePEc:brf:journl:v:14:y:2016:i:2:p:225-268
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    More about this item

    Keywords

    Idiosyncratic volatility; Average correlation; Disaggregated volatility; Brazilian stock Market;
    All these keywords.

    JEL classification:

    • G11 - Financial Economics - - General Financial Markets - - - Portfolio Choice; Investment Decisions
    • G12 - Financial Economics - - General Financial Markets - - - Asset Pricing; Trading Volume; Bond Interest Rates

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