Temporal Variation in Market Efficiency: Empirical Evidence for B3 Sectoral Indices (2016-2024)
Name: EDUARDO ATAIDE DOS SANTOS
Publication date: 28/08/2025
Advisor:
Name |
Role |
|---|---|
| EDSON ZAMBON MONTE | Advisor |
Examining board:
| Name |
Role |
|---|---|
| ANTÔNIO FERNANDO COSTA PELLA | Examinador Externo |
| EDSON ZAMBON MONTE | Presidente |
| RICARDO RAMALHETE MOREIRA | Examinador Interno |
Summary: This study investigates the time-varying degree of (in)efficiency in the Brazilian stock market through the analysis of long-term dependence in the returns and volatilities of seven B3 sectoral indices – IEE, IMOB, IND, IFNC, ICON, IMAT, and UTIL – from
January 1, 2016, to July 31, 2024. The fractional integration parameter was estimated using the Geweke and Porter-Hudak (GPH) method, and rolling estimation procedures were employed to capture the dynamic evolution of persistence, while the Bai and
Perron (1998, 2003) methodology was applied to identify structural breaks. The results show that returns predominantly exhibit short memory, even during the COVID-19 pandemic, which is consistent with the weak form of the Efficient Market Hypothesis
(EMH). In contrast, volatilities display temporary long memory during the peak of COVID-19, gradually returning to pre-crisis levels. This pattern is aligned with the Fractal Market Hypothesis (FMH), indicating that market equilibrium is disrupted during
crises, increasing persistence, and with the Adaptive Markets Hypothesis (AMH), as markets subsequently adjust and recover efficiency. These findings have implications for investors, portfolio managers, and policymakers: for investors, the short-memory
behavior in returns reinforces the unpredictability of prices, while the temporary persistence in volatilities highlights the need for enhanced risk management during crises; for policymakers, persistence indicators can serve as additional tools to monitor
sectoral stability and anticipate potential systemic risks, especially in sectors more sensitive to shocks.
