The Behaviour of Volatility Components of Brazilian Stocks

Hudson Chaves Costa (), João Henrique Gonçalves Mazzeu () and Newton Carneiro Affonso da Costa ()
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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: Departamento de Economia, Universidade Federal de Santa Catarina (UFSC)

Brazilian Review of Finance, 2016, vol. 14, issue 2, 225-268

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.

Keywords: Idiosyncratic volatility; Average correlation; Disaggregated volatility; Brazilian stock Market (search for similar items in EconPapers)
JEL-codes: G11 G12 (search for similar items in EconPapers)
Date: 2016
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Persistent link: https://EconPapers.repec.org/RePEc:brf:journl:v:14:y:2016:i:2:p:225-268

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