ANALYSIS OF INTERNAL AND EXTERNAL EVENTS IN THE BEHAVIOR OF ORDINARY STOCKS AND PREFERENCES OF THE PETROBRAS HOLDING: 1994-2002

Abstract

The aim of this article is to study the behavior of Petrobras stock PETR3 ON and PETR4 PN in the local market – Bovespa - and PBR and PBRA in the NYSE from January 1994 to December 2002. As the behavior of the stocks could have changed due to relevant news, we focus on economic-administrative-financial news and the country’s political events as break points in the stock price series. Following the event literature, the market model was used to calculate the stock betas. To detect the presence of abnormal returns (outliers) recursive residuals and recursive betas were estimated. Finally, the hypothesis of structural break on the stock price behavior was tested using Chow tests. The results indicate that sovereign and corporate rating changes have little effect on the stocks. Administrative/financial news is more important for beta changes, particularly the Exchange rate devaluation of 1999. One may thus argue that the corporate and sovereign ratings are informational sources although they do not unleash abrupt changes in returns.