International portfolio diversification: evidence from emerging markets

Taking into account previous research we could assume to be beneficial to diversify investments in emerging economies. We investigate in the paper International Portfolio Diversification: evidence from Emerging Markets if it still holds true, given the assumption of larger world markets integration. Our results suggest a wide spread positive time-varying correlations of emerging and developed markets. However, pair-wise cross-country correlations gave evidence that emerging markets have low integration with developed markets. Consequently, we evaluate out-of-sample performance of a portfolio with emerging equity countries, confirming the initial statement that it has a better a risk-adjusted performance over a purely developed markets portfolio.

Elections and stock market volatility: evidence in OECD countries and developing countries

Este trabalho estuda se existe impacto na volatilidade dos mercados de ações em torno das eleições nacionais nos países da OCDE e nos países em Desenvolvimento. Ao mesmo tempo, pretende, através de variáveis explicativas, descobrir os fatores responsáveis por esse impacto. Foi descoberta evidência que o impacto das eleições na volatilidade dos mercados de ações é maior nos países em Desenvolvimento. Enquanto as eleições antecipadas, a mudança na orientação política e o tamanho da população foram os factores que explicaram o aumento da volatilidade nos países da OCDE, o nível democrático, número de partidos da coligação governamental e a idade dos mercados foram os factores explicativos para os países em Desenvolvimento.

Brazil’s 2014 presidential elections: the interconnection between election news and stock market behavior

This study researches whether there has been abnormal stock market behaviour in Brazil as a consequence of election news (observed via opinion polls), regarding the last Brazilian presidential election, held in October 2014. Via applying event study methodology, the research on the Ibovespa and Petrobras suggests that events in which Rousseff was gaining in share have been subject to negative abnormal returns, and events where Rousseff was loosing in share have led to positive abnormal returns. Moreover, volatility has been significantly elevated during the election period and volume has been found to have slightly increased.

Sustainability indexes: why join in? A study of the Corporate Sustainability Index (ISE) in Brazil

In the past decade, indicators have been created to assess the sustainability performance of companies listed in stock exchange markets. Academics and practitioners expect companies to benefit from being listed in such indexes, but evidence of value creation is still scarce. Since virtually all studies about the Corporate Sustainability Index (ISE) of the S~ ao Paulo Stock Exchange (Brazil) e the object of the present study e focused on the value of shares, we initially looked for answers in the finance theory. We collected secondary data about the financial and economic performance of companies forming the ISE's ‘theoretical portfolio’, as these kinds of indexes are also known. In a second stage, we sought additional motivations for companies to make efforts to be listed in the index. We collected additional data and interviewed representatives of key companies listed in the ISE, as well as industry leaders who chose not to participate in the selection process. The results support the main propositions of the institutional theory, as well as the ‘pays to be green’ literature e that the intangible value created by voluntary environmental initiatives, such as access to knowledge, new capabilities and reputational gain, better explain the efforts companies make to be listed in the ISE index

The Sao Paulo stock exchange and the economic stabilization

The inflationary stabilization recently observed in Brazil brings a lot of changes in all aspects of the country’s economic life. In this work we look at the impacts on the stock market, specifically at Bovespa - the São Paulo Stock Exchange. We analyze the leading variables and statistics that describe Bovespa’s behavior, such as volatility and systematic risk, comparing the four years preceding and the four years after 1994, when the Real Plan was implemented. In order to eliminate exogenous influences, we use control series made with international Stock Exchanges Indexes. The results show that after 1994 there was reduced volatility, increased trade volume, reduced efficiency of the Bovespa Index and no changes in systematic risk.

Asymmetric preferences in investment decisions in the Brazilian financial market

The main objective of this article is to test the hypothesis that utility preferences that incorporate asymmetric reactions between gains and losses generate better results than the classic Von Neumann-Morgenstern utility functions in the Brazilian market. The asymmetric behavior can be computed through the introduction of a disappointment (or loss) aversion coefficient in the classical expected utility function, which increases the impact of losses against gains. The results generated by both traditional and loss aversion utility functions are compared with real data from the Brazilian market regarding stock market participation in the investment portfolio of pension funds and individual investors.

Do insiders get abnormal returns? : event studies on the trades of insiders of the firms with differentiated corporate governance of the São Paulo stock exchange

The subject insider trading is controversial. This paper presents series of event studies carried through on the trades with stocks of the firm carried by insiders with the objective to detect abnormal returns, based on the access to privileged information. The sample is composed by trades performed by insiders of the companies with stocks negotiated in the São Paulo Stock Exchange, that are classified as firms with differentiated corporate governance. Indication that trades performed by insiders resulted in abnormal returns compared to the statistically significant expected ones, as in the purchases of common shares; or for selling of preferred stocks.

Revisiting modern portfolio theory

This paper revisits Modern Portfolio Theory and derives eleven properties of Efficient Allocations and Portfolios in the presence of leverage. With different degrees of leverage, an Efficient Portfolio is a linear combination of two portfolios that lie in different efficient frontiers - which allows for an attractive reinterpretation of the Separation Theorem. In particular a change in the investor risk-return preferences will leave the allocation between the Minimum Risk and Risk Portfolios completely unaltered - but will change the magnitudes of the tactical risk allocations within the Risk Portfolio. The paper also discusses the role of diversification in an Efficient Portfolio, emphasizing its more tactical, rather than strategic character

Pricing the cost of an election: the impact of the 2014 elections on stock markets

Qual o efeito de eleições em ativos reais? É possível mensurar diretamente a diferença de preços mesmo que só possamos enxergar um dos resultados potenciais? Essa dissertação estima esses efeitos utilizando metodologia baseada em opções sobre ações. O modelo aqui desenvolvido adaptção tradicional Black-Scholes para incorporar dois novos parâmetros: um salto no preço do ativo perfeitamente antecipado e uma série de probabilidades diárias refletindo as crenças sobre quem venceria a corrida eleitoral. Aplicamos esse método para o caso brasileiro das Eleições Presidenciais de 2014 e a Petrobras - uma importante companhia do setor petrolífero do país -utilizando dados de bolsa do segundo turno das eleições. Os resultados encontrados mostram uma diferença de 65-77% para o valor da companhia, dependendo de quem vencesse nas urnas. Isso é equivalente a aproximadamente 2.5% do PIB de 2014 do país.