Which information matters to market risk spreading in Brazil? Volatility transmission modelling using MGARCH-BEKK, DCC, t-Copulas

Among a political disorder, there are additional difficulties to predict sources of risk. The objective of this article was to analyze the spillover effects and channels of volatility from and to Brazilian stock market (Bovespa) in the period that goes from 2014 to 2016. In this period, is marked as...

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Bibliographic Details
Published inThe North American journal of economics and finance Vol. 45; pp. 83 - 100
Main Authors de Oliveira, Felipe A., Maia, Sinézio F., de Jesus, Diego P., Besarria, Cássio da N.
Format Journal Article
LanguageEnglish
Published Elsevier Inc 01.07.2018
Subjects
DCC
GARCH-BEKK
Market risk
Spillover
t-Copulas
C32
Spillover
G31
F42
DCC
GARCH-BEKK
t-Copulas
Market risk
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Summary:Among a political disorder, there are additional difficulties to predict sources of risk. The objective of this article was to analyze the spillover effects and channels of volatility from and to Brazilian stock market (Bovespa) in the period that goes from 2014 to 2016. In this period, is marked as one of the most volatile periods since the subprime crisis. A political and economic crisis, followed by federal police investigation combined with a period of slow economic growth and unconventional monetary and, a downtrend in commodities prices and in the world, makes the task to identify the sources of price risk dubious. Using a MGARCH-BEKK, DCC and t-Copulas modelling, the main results of the article suggest US monetary policy and rebalancing of portfolios generates volatility to Brazil. However, Bovespa also generates volatility to commodity markets and US bonds market. This is explained by the role that Brazil plays as mediator of these markets when allocators diversify their positions with Latin America and in commodities.
ISSN:1062-9408
1879-0860
DOI:10.1016/j.najef.2018.02.003