An econometric Panel-MIDAS model of asset returns in the brazilian stock market

Abstract

We present the specification, estimation and testing of an econometric model intended to explain and forecast individual returns of securities listed on the Brazilian stock market. The model's explanatory variables include macroeconomic, fundamental and behavioural variables sampled at different frequencies. The model uses the MIDAS regression methodology, which supports estimation of regressions with variables sampled at different frequencies. The sample includes non-financial institutions listed in the Brazilian stock exchange from 2010 to 2016. The results indicate that the model is robust in explaining and forecasting quarterly returns of individual shares listed on that market.