Economic Tracking Portfolios

58 Pages Posted: 9 Jul 1999

See all articles by Owen A. Lamont

Owen A. Lamont

Harvard University - Department of Economics

Multiple version iconThere are 2 versions of this paper

Date Written: March 23, 1999

Abstract

An economic tracking portfolio is a portfolio of assets with returns that track an economic variable. Monthly returns on stocks and bonds are useful in forecasting post-war U.S. output, consumption, labor income, inflation, stock returns, bond returns, and Treasury bill returns. These forecasting relationships define portfolios that track market expectations about future economic variables. Using tracking portfolio returns as instruments for future economic variables substantially raises the estimated sensitivity of asset prices to news about future economic variables. Out-of-sample results show that tracking portfolios are useful in forecasting macroeconomic variables and hedging economic risk.

JEL Classification: E17, E44, G11

Suggested Citation

Lamont, Owen A., Economic Tracking Portfolios (March 23, 1999). CRSP Working Paper No. 489. Available at SSRN: https://ssrn.com/abstract=157772 or http://dx.doi.org/10.2139/ssrn.157772

Owen A. Lamont (Contact Author)

Harvard University - Department of Economics ( email )

Littauer Center
Cambridge, MA 02138
United States

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