Volatility transmission between small and large caps in the Brazilian market

Abstract

Researches about volatility transmission between small and large company stocks had received great attention in last years. Based on this idea, the current paper aims to analyze the occurrence of volatility transmission between small and large companies in Brazil. To that, we estimate multivariate GARCH models. As asset proxies we used the Small and Mid-Large cap BM&F/Bovespa index. Results allow concluding that large company stocks impact the small stocks conditional volatility. However, the relationship does not maintain it in reverse direction. This result is in accord with the addressed subject.

Keywords

• Volatility Spillover
• Multivariate GARCH
• Large and Small Companies