The impact of the global financial crisis on the Brazilian stock market

Abstract

Over recent decades, the deepening of commercial and financial linkages between countries, in contrast to their expected economic opportunities and benefits, increased the frequency and intensity of propagation of negative financial shocks. The Global Financial Crisis (GFC) of 2007–2008, seemingly related only to the US real estate industry, affected a wide range of sectors as well as stock markets in developed and developing countries; the Brazilian stock market did not escape unscathed. This chapter has two main focuses. Firstly, it analyses the most important negative movements seen in the Brazilian stock market over a time span of more than 17 years. Secondly, the hypothesis of GFC transmission from financial Markets in the USA to the Brazilian stock market is econometrically tested using a DCC-GARCH model as well as Lagrange Multiplier tests. Finally, evidence is reported that favours the hypothesis of the crisis transmission to the Brazilian stock market.