The top-5 Brazilian stocks’ resilience over 13 years of political-economic events

Resiliência das ações top-5 brasileiras ao longo de 13 anos de eventos político-econômicos

ABSTRACT

Purpose:

This study analyzes how political-economic events have affected the Brazilian capital market over 13 years by evaluating the abnormal returns of the five most liquid stocks (Top-5).

Originality/value:

This research proceeds from previous studies by analyzing various political-economic events that impacted, to some extent, the prices of companies listed on the Brazilian Stock Exchange over 13 years. Considering both favorable and opposing evidence to the efficient market hypothesis (EMH), this study provides an original and robust test to evaluate market efficiency, considering various events and companies.

Design/methodology/approach:

We used the event study methodology to measure the impact of each event on stock prices by using the day before and after the event analyzed. We performed capital asset pricing model (CAPM) estimations with 110 observations before the event to assess abnormal returns. To assess the research hypotheses, we used the average abnormal return test around the event (Window – 1.1).

Findings:

We found that the five major companies in the Brazilian stock market were efficient in the EMH semi-strong form test despite 13 years of extreme events. Their returns did not change significantly after the events, differentiating themselves from studies that question market efficiency. Therefore, market participants should not expect abnormal returns in similar events.

KEYWORDS:
crises; extreme events; liquidity; efficient market hypothesis; event study