The Covid-19 Pandemic Crisis on the Brazilian Stock Exchange: An Application of the Markov Switching Dynamic Regression Model


Authors : Carlos Alberto Gonçalves da Silva

Volume/Issue : Volume 6 - 2021, Issue 1 - January

Google Scholar : http://bitly.ws/9nMw

Scribd : https://bit.ly/3q6Yehf

This article provides a quantitative analysis using the Markov Switching Dynamic Regression (MSDR) model, in order to highlight the dynamics presented by Ibovespa during the period from January 2005 to December 2020, in which the subprime crisis occurred and the COVID-19 crisis started. In particular, it used two regimes (regime 1- low volatility and regime 2-high volatility) in the model so that the market parameters (Ibovespa) behave differently during economic crises with the regimes representative. The Ibovespa remained on regime 1 (low volatility) for three periods, totaling 186 months. In regime 2 (high volatility - 2008 and 2020 crises), it remained for about 6 months, that is, 4 months in the 2008 crisis and 2 months in the COVID-19 crisis.

Keywords : Markov Switching Dynamic Regression, Covid19 Pandemic, Brazilian Stock Exchange.

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