Influence of economic events on investors' behavioral biases and their stock market investment decisions

Abstract

This study investigates the influence of economic events on investors' behavioral biases and their investment decisions regarding the BOVA11 Exchange-Traded Fund (ETF) between 2010 and 2024. To this end, the event study methodology was employed, using the Capital Asset Pricing Model (CAPM) to estimate expected returns, calculate abnormal returns (AR) and cumulative abnormal returns (CAR), complemented by the application of Student's t-test to assess the statistical significance of the results. The findings indicate that different economic events produce heterogeneous patterns of reaction in the Brazilian stock market, influenced by the degree of predictability of the available information and by the formation of investors' expectations. Behavioral biases associated with loss aversion, herd behavior, overconfidence, and confirmation bias were observed, with their intensity varying according to the nature of the economic event analyzed. The results reinforce that investment decisions are not determined exclusively by the economic fundamentals of assets but are also influenced by psychological and informational factors in contexts of heightened uncertainty. As a contribution, this study advances the understanding of the interaction between economic events, investor behavior, and financial market dynamics in the Brazilian context.

Keywords: behavioral finance; event study; BOVA11 ETF; economic events; brazilian stock market.