Abstract
We summarize the fifty-year history (1968-2017) of the Ibovespa, a gross total return index that comprises the most liquid stocks traded on the São Paulo Stock Exchange in Brazil. We provide contextual material on the Brazilian economy during this 50-year period (such as the fight against hyperinflation, the privatization of companies, and economic crises) and its impact on the index composition and performance. We discuss the effect of the change in the index calculationmethodology that took place in 2014, when companies with lower market capitalization became less representative in the index. Finally, we discuss the representativeness of each industry on the Ibovespa portfolio.
Highlights
The Bolsa de Valores de São Paulo (Bovespa) index was created fifty years ago, on January 2, 1968
Investment performance indexes differ from stock price indexes mainly because in their computation all cash dividends and capital gains are taken into account (Fisher, 1966)
We provide contextual material on the Brazilian economy during this 50-year period, covering the years when the country was under military rule, the redemocratization, the stagnation and inflation years, the economic stabilization plans to defeat inflation, and the most recent years
Summary
The Bovespa index (or Ibovespa) was created fifty years ago, on January 2, 1968. The SPSE wanted to create an index that had a good representation of the most traded stocks on the exchange It adopted for the Ibovespa the same methodology used by the Rio de Janeiro Stock Exchange (RJSE) for its own index, the IBV (Índice Bolsa de Valores) (Leite & Sanvicente, 1994). Investment performance indexes differ from stock price indexes mainly because in their computation all cash dividends and capital gains are taken into account (Fisher, 1966). Indexes such as the Ibovespa and the S&P 500 are examples of investment performance indexes, whereas the Dow Jones Industrial Average is an example of a stock price index. We provide contextual material on the Brazilian economy during this 50-year period, covering the years when the country was under military rule, the redemocratization, the stagnation and inflation years, the economic stabilization plans to defeat inflation, and the most recent years
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