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Forecasting the BRICS stock returns with best subset regressions

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  • Ciner, Cetin

Abstract

Prior work identifies significant informational spillovers between the BRICS stocks, oil price and US equities. Our primary goal in this study is to examine whether these linkages can be utilized to improve out of sample predictions of the BRICS stock returns. We use a sparse regression method, best subset selection, and allow for fat tailed distributions. Our analysis detects robust forecasting ability in the Covid-19 era. We also show that the US equity market, but not oil price, contains significant predictive power for the BRICS stocks. The findings are, overall, consistent with the gradual diffusion of information hypothesis.

Suggested Citation

  • Ciner, Cetin, 2025. "Forecasting the BRICS stock returns with best subset regressions," Finance Research Letters, Elsevier, vol. 77(C).
    • Handle: RePEc:eee:finlet:v:77:y:2025:i:c:s1544612325003022
    DOI: 10.1016/j.frl.2025.107038
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    References listed on IDEAS

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