ANALYSIS OF STRUCTURAL BREAKS IN THE BRAZILIAN BASE INTEREST RATE AND THE STOCK MARKET UNDER THE ADVENT OF COVID-19

Authors

DOI:

https://doi.org/10.26668/businessreview/2024.v9i4.4627

Keywords:

Interest Rate, Ibovespa, Financial Market, Structural Break

Abstract

Objective: Analyzing, by means of an AR model, the presence of structural breaks in the interest rate series and, as a result, to verify the effects and/or changes in the share price level of certain publicly traded companies broken down by economic sectors, from January 2015 to June 2022.

Theoretical Framework: Monetary policy has a substantial effect on investment intentions and, consequently, this is reflected in the business environment channeled through the Brazilian market indicator, the Ibovespa. A structural break is when the trends and patterns of association between observations in a time series change. This break usually reflects difficult times, such as the COVID-19 pandemic.

Method: Using an AR model and statistical tests, the presence of structural breaks in the Selic series was analyzed. The aim was to identify repercussions on the Brazilian stock market, for which the market value of 12 Ibovepa companies was used as a proxy.

Results and Discussion: There was a divergence between the share price and the interest rate when the structural breaks occurred.

Research Implications: Knowing these structural changes can improve forecasting capacity and reduce the risk of estimating erroneous results.

Originality/Value: This study contributes to the literature by analyzing the accuracy of forecasts, verifying the magnitude of any shortfall, which can be used to make decisions in the business environment.

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Published

2024-04-16

How to Cite

Pereira, D. D. M., & Arevalo, J. L. S. (2024). ANALYSIS OF STRUCTURAL BREAKS IN THE BRAZILIAN BASE INTEREST RATE AND THE STOCK MARKET UNDER THE ADVENT OF COVID-19. International Journal of Professional Business Review, 9(4), e04627. https://doi.org/10.26668/businessreview/2024.v9i4.4627