Measuring structural risk disposition in Brazilian equities

Abstract

We propose a measurement architecture for persistent structural risk disposition in the Brazilian equity market and evaluate one implementation, the Structural Risk Disposition Composite (SRDC). The composite aggregates four weakly correlated market-derived dimensions—options positioning, credit conditions, market breadth, and external capital allocation—each expressed as a rolling one-year percentile, over 2016–2026 (2,388 daily observations). The construct is formative, in the tradition of financial conditions indexes. Replacing a price-momentum dimension with credit conditions yields a pair of results: an informational gain over financial-stress criteria that placebo substitutions cannot reproduce (an incremental criterion gain ΔR²(credit–noise) of 0.112 on realized volatility, a criterion sharing no input with the composite), and a reduction of the composite's price-trend correlation from 0.60 to 0.34—generic, by our own placebos, to any slow price-orthogonal replacement, meaningful only within the pair. The composite describes market state; it does not predict returns.