A Behavioral Interpretation of Volatility Patterns in Brazilian Stock Market: Analysis of Pre and Post-COVID-19 Periods from 2019 to 2021

There has recently been an increasing number of new investors in the Brazilian stock markets, providing asset allocation opportunities as well challenges terms individual judgment and decision-making. The departure point this paper is conjecture that Ibovespa (Brazilian exchange index) might reveal asymmetric volatility patterns during January 2019 to February 2021 period call for behavioral financial explanations. More specifically, aims subject bold empirical test. It draws on a threshold autoregressive conditional heteroskedasticity (TARCH) model investigate existence reactions under study. Our findings suggest traditional approach finance fails explain market behavior, since they do not fit with predictions based efficient hypothesis. Inspired by Vasileiou’s (2021) account what occurred New York Stock Exchange COVID-19, we then embark brief survey vast literature applied economics provide interpretation heuristics biases may be non-negligible mental mechanisms underlying Ibovespa’s detected responses.