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Predicting BRICS Stock Returns Using ARFIMA Models

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Author Info

  • Goodness C. Aye

    ()
    (Department of Economics, University of Pretoria)

  • Mehmet Balcilar

    ()
    (Department of Economics, Eastern Mediterranean University, Famagusta, North Cyprus,via Mersin 10, Turkey)

  • Rangan Gupta

    ()
    (Department of Economics, University of Pretoria)

  • Nicholas Kilimani

    ()
    (Department of Economics, University of Pretoria)

  • Amandine Nakumuryango

    ()
    (Department of Economics, University of Pretoria)

  • Siobhan Redford

    ()
    (Department of Economics, University of Pretoria)

Abstract

This paper examines the existence of long memory in daily stock market returns from Brazil, Russia, India, China, and South Africa (BRICS) countries and also attempts to shed light on the efficacy of Autoregressive Fractionally Integrated Moving Average (ARFIMA) models in predicting stock returns. We present evidence which suggests that ARFIMA models estimated using a variety of estimation procedures yield better forecasting results than the non-ARFIMA (AR, MA, ARMA and GARCH) models with regard to prediction of stock returns. These findings hold consistently the different countries whose economies differ in size, nature and sophistication.

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Bibliographic Info

Paper provided by University of Pretoria, Department of Economics in its series Working Papers with number 201235.

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Length: 24 pages
Date of creation: Dec 2012
Date of revision:
Handle: RePEc:pre:wpaper:201235

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Keywords: Fractional integration; long-memory; stock returns; long-horizon prediction; ARFIMA; BRICS;

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References

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Cited by:
  1. Abounoori, Abbas Ali & Naderi, Esmaeil & Gandali Alikhani, Nadiya & Amiri, Ashkan, 2013. "Financial Time Series Forecasting by Developing a Hybrid Intelligent System," MPRA Paper 45860, University Library of Munich, Germany.
  2. Rafik Nazarian & Esmaeil Naderi & Nadiya G. Alikhani & Ashkan Amiri, 2014. "Long Memory Analysis: An Empirical Investigation," International Journal of Economics and Financial Issues, Econjournals, vol. 4(1), pages 16-26.

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