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Forecasting through the Rear-View Mirror: Data Revisions and Bond Return PredictabilityEric GhyselsUniversity of North Carolina (UNC) at Chapel Hill - Department of Economics; University of North Carolina (UNC) at Chapel Hill - Finance Area Casidhe HoranThe Stephen M. Ross School of Business at the University of Michigan Emanuel MoenchFederal Reserve Bank of New York November 1, 2012 FRB of New York Staff Report No. 581 Abstract: Real-time macroeconomic data reflect the information available to market participants, whereas final data — containing revisions and released with a delay — overstate the information set available to them. We document that the in-sample and out-of-sample Treasury return predictability is significantly diminished when real-time as opposed to revised macroeconomic data are used. In fact, much of the predictive information in macroeconomic time series is due to the data revision and publication lag components.
Number of Pages in PDF File: 30 Keywords: return predictability, real-time data, dynamic factor models JEL Classification: G10, G12 working papers seriesDate posted: November 13, 2012 ; Last revised: November 15, 2012Suggested CitationContact Information
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