Structure and Dynamics of the Brazilian Stock Market: A Correlation Analysis

Abstract

The impacts of the Subprime Financial crisis resulted in generally similar decline and volatility in both developed and emerging stock markets. However, in the aftermath of the crisis, the performance of emerging economies was stronger. To investigate this phenomena, this paper seeks to gauge the structure of one of the BRICS economies, the Brazilian stock market, for the period 2003 -- 2013, to determine possible determinants of this behavior.Using a Pearson and partial correlation analysis we find that the IBOVESPA index has little affect on the magnitude of the correlations of its components. This finding differs from results obtained recently for developed markets. Finally, we introduce a novel method to investigate the cohesion and dynamics of financial markets that provide new insights into the structure and dynamics of the stock market and its relation to the real economy.