Behavioral finance, market anomalies, and speculative bubbles

An analysis of news

Abstract

Purpose: speculative bubbles are formed in the financial market as a result of errors of evaluation by market decision makers, and, given the behavioral biases of the market, the assets traded in the market may be erroneously evaluated so that their price is far from their intrinsic value. Thus, the objective of this paper is to detect bubbles in the Brazilian financial market by means of the Ibovespa index from 1993 to 2020, based on the analysis of informative news about the market. Approach: The research typology is delineated as experimental in relation to the objectives, and presents statistical tests and specific coherent procedures that allow for reproduction; furthermore, it is classified as quantitative-qualitative in relation to the analysis and treatment of the data. Results: five anomalous windows were verified throughout the analyzed period, all with an average duration of 252 days, revealing the highest lows in the last 4 months of the year, with more recurrence in October and September (respectively). It was also noted that after the anomaly periods, there is always a greater volume of negative news or equality between positive and negative news. In the analysis of correlations, it was noted that the negative news have greater power of influence and prediction in the returns of the anomalous periods given its strong degree of negative and increasing correlation along the windows. Contributions: the article theoretically corroborates the research area by bringing the behavioral perspective to the detection of speculative bubbles in the market. In addition, it fosters practical knowledge by bringing observations in the form of practical insights for investors.