Pedro Guilherme Ribeiro Piccoli

Stock Overreaction to Extreme Market Events

In this paper we find that stocks overreact to both positive and negative extreme daily movements of the broader market, but more intensely in the latter case. The overreaction is even more pronounced when the market exhibits clustered extreme swings, indicating that the overreaction is related to market volatility. Indeed, a contrarian investment strategy earns a significant Fama-French daily alpha of 0.34% (85.68% annualized) with a Sharpe ratio of 5.23 in highly volatile circumstances. Stock overreaction appears to be driven by the loser stocks that revert more strongly, even as they exhibit a lower market beta than the winners.

Overreaction to extreme market events and investor sentiment

ABSTRACT This article investigates the role of investor psychology, captured here by investor sentiment index, in driving individual stock price reactions to extreme movements in the broader market. In addition to confirming prior evidence of overreaction, we find much stronger overreaction when investor sentiment is low rather than high. This is consistent with the role of the contrast dimension of an uncommon event, suggested in the psychology literature, over and above the emotion of surprise it brings about. In a low sentiment environment, the contrast is sharper and hence leads to stronger overreaction.

Investor Sentiment and the Risk-Return Tradeoff in the Brazilian Market

The present study examines the influence of investor sentiment on the risk-return relationship in the Brazilian stock market from 2002 to 2015. Using the Consumer Confidence Index as a substitute for the level of investor sentiment, we found that the relationship between conditional variance and raw return on stocks is positive (negative) in periods of low (high) sentiment, except for small stocks, which always show a negative relationship between the constructs. The deterioration of the positive relationship between risk and return when sentiment is high is a result of the sharp growth in the number of less sophisticated investors under these circumstances.

Do Cooperatives Manage Earnings to Avoid Losses and Earnings Decreases

This paper investigates the use of earnings management by cooperatives to avoid reporting losses or earnings decreases. Based on a unique dataset comprising quarterly financial statements reported by 66 Brazilian agricultural cooperatives between 2000 and 2015, our results show that cooperatives do indeed manage their results to avoid reporting decreases in earnings and small losses, more markedly in the latter case. This practice is more frequent in large cooperatives than in small ones and in more leveraged organizations. We also find that this practice decreases along with increased board size, which is inconsistent with the evidence for commercial firms. Our findings contribute to the fields of earnings management detection and corporate governance in cooperatives.

DETERMINANDO A TAXA LIVRE DE RISCO PARA A APLICAÇÃO DO CAPM NO MERCADO BRASILEIRO

A adaptacao do CAPM ao mercado brasileiro tem sido tema de diversos estudos academicos. Um dos aspectos relacionados ao tema refere-se a parametrizacao da taxa livre de risco (Rf), comumente oscilando na literatura entre a remuneracao da poupanca, a taxa Selic e o juro dos treasury bonds norte-americanos. O presente artigo buscou estabelecer qual destas variaveis e a mais adequada para o conceito de taxa livre de risco do CAPM no Brasil. Baseando-se no fenomeno do flight to quality, comparou-se o comportamento do Ibovespa com o comportamento destes constructos durante a ultima crise financeira. A conclusao e que, ainda que todos tenham apresentado correlacoes significativas com o Ibovespa no periodo, o maior poder explicativo para o desempenho da bolsa deveu-se ao comportamento dos treasury bonds , sendo ele o ativo recomendado para o conceito de taxa livre de risco no Brasil.