Covariance stability and the 2008 financial crisis: the impact in the portfolio of the 10 biggest companies in BM&FBOVESPA between 2004 e 2012

摘要

This study's purpose is to analyse the covariance between the ten biggest participants of the BM&FBovespa stock market to test the influence of the instability in the covariance between assets to the structure of a portfolio of investments of a portfolio composed by this assets. To acomplish that, we check the covariances between the daily returns of the 10 selected stocks before, during and after the 2008 financial crisis. The procedure of this research includes: (1) collection of returns of the selected stocks between 2004 and 2012; (2) the composition of the classical portfolio theory proposed by Markowitz(1952); and (3) the measurement of the effect of the unstable covariance between the 10 selected assets in the maintenance of the portfolio when controlling for return and risk preferences of a hipotetical investor. We find that asset correlations are impacted by the assets covariances that not stable in the whole time set for the study but are specialy sensitive in the financial crisis period. This means that both risk and return of the portfolio will change greatly if the weights are not recalculated from time to time. This suports the idea that portfolio theory might benefit from the development of stability weigthed techniques are developed.