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The relationship between oil prices and the Brazilian stock market

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  • Ferreira, Paulo
  • Pereira, Éder
  • Silva, Marcus

Abstract

Crude oil remains a very important product not only because of its regular use, but also because it is a very important financial asset, influencing the economy as a whole. In this paper, we assess how WTI oil price shocks are related with the Brazilian economy as a whole, but also with each of the listed companies in Ibovespa, searching for the relationships with different economic activities. Based on the Detrended Cross-Correlation Analysis correlation coefficient, which allows us to analyse the impacts for different time scales, we conclude unsurprisingly that the most affected sectors are those most related with the use of oil. However, another important result is the significant correlation between oil price shocks and the returns of the financial sector, showing this particular sector’s exposure to oil, i.e., this is one of the sectors most correlated with oil returns. This is relevant not only for investors but also for authorities, because possible future oil shocks could have a high impact on the Brazilian financial sector

Suggested Citation

  • Ferreira, Paulo & Pereira, Éder & Silva, Marcus, 2020. "The relationship between oil prices and the Brazilian stock market," Physica A: Statistical Mechanics and its Applications, Elsevier, vol. 545(C).
    • Handle: RePEc:eee:phsmap:v:545:y:2020:i:c:s0378437119320874
    DOI: 10.1016/j.physa.2019.123745
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