Hierarchical Determinants of Brazilian Stock Returns During the 2008 Financial Crisis

Ricardo Goulart Serra and Roy Martelanc

Emerging Markets Finance and Trade, 2014, vol. 50, issue S5, 51-67

Abstract: We analyze the influence of firm- and industry-level determinants on stock returns during the 2008 financial crisis, using a hierarchical linear model to analyze the returns of 135 Brazilian firms. The impact of these determinants on stock returns has not received sufficient attention in periods of severe market decline. The following determinants were significant: (1) industry-level determinants (unlevered beta, historical sales growth, and regulated tariff), and (2) firm-level determinants (size, illiquidity, and book-to-market ratio). We also identified an indirect influence of unlevered beta over book-to-market that reflects a behavior that we call the “misconfidence effect.”

Date: 2014
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DOI: 10.2753/REE1540-496X5005S504

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