Stock performance of Brazilian sectors after the 2014 recession: a synthetic control approach
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2020-01-16
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Tavares, Priscilla Albuquerque
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Identifying whether recessions are caused by domestic or external factors demands methodological rigor on choosing the most appropriate quantitative approach. The synthetic control method has been used to evaluate drivers of the Brazilian economic performance over the last decade from a comparative perspective, specifically concerning macroeconomic aggregates. This dissertation aims to identify which sectors of the Brazilian economy decoupled from international benchmarks during the post-2014 recession, potentially due to domestic factors crystallized by the government that was re-elected in October/2014. I utilize the synthetic control approach to compare domestic sectorial indexes - built upon data gathered from shares of Brazilian listed companies - with international peers before and after the elections of 2014. The findings show a general deterioration in most of the Brazilian sectors in US dollar terms, as an indirect effect of the exchange rate depreciation during the period. Moreover, non-cyclical consumption, machinery and real estate sectors underperformed the comparable ones even in local currency terms, hypothetically signaling domestic causes for the momentum of these industries, which are highly correlated with macroeconomic variables and policies.