The Brazilian Stock Market Indicator: Determinants to Measure Variation and Direction

Abstract

The volatility has a great influence on agents' decision-making, therefore, measuring the degree and effect of the determining factors of the stock market indicator is of paramount importance. The study, based on the premise that assets with greater weight in the portfolio, as well as the foreign currency (dollar) quotation, can serve as predictors to assess the volatility of the indicator. For this purpose, an error correction model - VEC was used, starting from four explanatory variables defined and theoretically supported. The results show the importance of the autoregressive method, which is manifested by means of significant statistics to explain the variation and direction of Ibovespa. Although the importance of oil, iron ore and the dollar are determining variables, other factors such as cooperation agreements and / or stimuli aimed at the recovery of the economy cannot be neglected.

Ibovespa’s response to the behavior of oil and ore prices during the international crisis caused by COVID-19

“…In any analysis of time series, it is necessary, first, to verify the order of integration of the series and, based on this information, to identify whether the series has a unit root or if it is stationary. Among the various tests used to assess the stationarity of a time series, there is the Dickey-Fuller, a procedure proposed by Fuller (1976) and complemented by Fuller (1979, 1981) which is known as the Augmented Dickey-Fuller (ADF) test, which is widely used in the literature to test the presence of a unit root, which constitutes a situation of non-stationarity [1]…”

“…On the commodities' side, the appreciation of the dollar has had another effect for developing countries, such as Brazil. The rise of the price reflects not only the new commodities' price, which has become more expensive, but also of the dollar, which has also risen (Arevalo et al, 2020). Source: compiled by the authors.…”

“…The political environment is an important aspect that complements the effect of macroeconomic variables, as it is a key factor in attracting capital. In the financial field, it is possible to affirm that political noises in the internal environment create great uncertainty for investors, which is reflected in the pricing of company value (Arevalo & Meurer, 2020).…”