Abstract

We investigate the dynamic connectivity and potential contagion risk among stocks of companies in the Brazilian stock exchange’s electricity sector index. Using daily data from 2009 to 2025 and a TVP-VAR model, we measure volatility spillovers in the frequency domain to analyze the interrelationships among the stocks, between the stocks and the market, and from the market to each of the stocks. The results indicate that connectivity levels varied from 28% to over 70%, with peaks coinciding with major socioeconomic and political events, as well as the COVID-19 pandemic and the Brazilian financial crisis of 2014-2016. Short-term spillovers are the most prevalent, and since the pandemic period, there has been a large increase in total connectivity. Furthermore, Engie Brasil Energia, Equatorial Energia, and CPFL Energia are the main net transmitters of shocks, while TAESA and COPEL are the main recipients from the market.

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