SYSTEMIC RISK AND CONTAGION EFFECT FROM COVAR METHOD PERSPECTIVE: AN ANALYSIS WITH THE MOST LIQUID SHARES LISTED ON BM&FBOVESPA

Abstract

This paper aims to evaluate the most liquid shares traded on the BM&FBOVESPA, showing how variations in stock and market returns generate and suffer negative externalities among themselves, from the CoVaR method. Therefore, we used both the monthly stock return, as the BOVESPA index, analyzing the period from1994 to 2015. It were calculated the VaR and ?CoVaR^sist|i in order to compare methods. For the VaR, it was noted that the VALE, represented by the R_VALE3 and R_VALE5, presented more VaR, with -1.35 and -1.33, respectively. Regarding ?CoVaR^sist|i, the R_VALE3 and R_ABEV3 were the ones that most contributed to the systemic risk, with -1.38 and -1.35, respectively. Thereby, a potential systemic crisis may not necessarily immerge from the financial sector, instigating a more comprehensive sector study and possible regulatory changes in different sectors.