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The Impact of unexpected changes in the benchmark rate on the Brazilian stock market

Author

Listed:
  • Fernando Nascimento de Oliveira

    (IBMEC-RJ)

  • Alexandre Romaguera Rodrigues da Costa

    (JAR Consultoria)

Abstract
To analyze empirically the impact of unexpected changes in the basic interest rate (SELIC rate) on the Brazilian stock market between January 2003 and May 2012, we constructed a surprise measure based on the market consensus. Our sample of events is composed of 88 meetings of the Brazilian Central Bank’s Monetary Policy Committee (COPOM). There were unexpected changes in the interest rate at 32 of these meetings. The results show that for each 1% unexpected increase in the SELIC rate, the stock market index (IBOVESPA) decreased 3.28%

Suggested Citation

  • Fernando Nascimento de Oliveira & Alexandre Romaguera Rodrigues da Costa, 2013. "The Impact of unexpected changes in the benchmark rate on the Brazilian stock market," Brazilian Business Review, Fucape Business School, vol. 10(3), pages 53-81, July.
    • Handle: RePEc:bbz:fcpbbr:v:10:y:2013:i:3:p:53-81
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    References listed on IDEAS

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