Automatic model selection for forecasting Brazilian stock returns

Ronan Cunha and Pedro Valls Pereira

No 398, Textos para discussão from FGV EESP - Escola de Economia de São Paulo, Fundação Getulio Vargas (Brazil)

Abstract: This study aims to contribute on the forecasting literature in stock return for emerging markets. We use Autometrics to select relevant predictors among macroeconomic, microeconomic and technical variables. We develop predictive models for the Brazilian market premium, measured as the excess return over Selic interest rate, Itaú SA, Itaú-Unibanco and Bradesco stock returns. We find that for the market premium, an ADL with error correction is able to outperform the benchmarks in terms of economic performance. For individual stock returns, there is a trade o between statistical properties and out-of-sample performance of the model.

Date: 2015-08-07
New Economics Papers: this item is included in nep-fmk and nep-for
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Persistent link: https://EconPapers.repec.org/RePEc:fgv:eesptd:398

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