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Should Macroeconomic Forecasters Use Daily Financial Data and How?

66 Pages Posted: 20 Nov 2010  

Elena Andreou

University of Cyprus - Department of Economics

Eric Ghysels

University of North Carolina Kenan-Flagler Business School; University of North Carolina (UNC) at Chapel Hill - Department of Economics

Andros Kourtellos

University of Cyprus - Department of Economics; University of Bologna - Rimini Center for Economic Analysis (RCEA)

Date Written: November 19, 2010

Abstract

We introduce easy to implement regression-based methods for predicting quarterly real economic activity that use daily financial data. Our analysis is designed to elucidate the value of daily information and provide real-time forecast updates of the current (nowcasting) and future quarters. Our findings show that while on average the predictive ability of all models worsens substantially following the financial crisis, the models we propose suffer relatively less losses. Moreover, these predictive gains are primarily driven by the asset classes of government securities, equities, and especially corporate risk.

Keywords: MIDAS Regressions, Macro Forecasting, Leads, Daily Financial Information, Daily Factors

JEL Classification: C22, C53, G10

Suggested Citation

Andreou, Elena and Ghysels, Eric and Kourtellos, Andros, Should Macroeconomic Forecasters Use Daily Financial Data and How? (November 19, 2010). Available at SSRN: https://ssrn.com/abstract=1711899 or http://dx.doi.org/10.2139/ssrn.1711899

Elena Andreou

University of Cyprus - Department of Economics ( email )

75 Kallipoleos Street
P.O. Box 20537
1678 Nicosia
Cyprus
+357 2 892449 (Phone)
+357 2 892432 (Fax)

Eric Ghysels (Contact Author)

University of North Carolina Kenan-Flagler Business School ( email )

Kenan-Flagler Business School
Chapel Hill, NC 27599-3490
United States

University of North Carolina (UNC) at Chapel Hill - Department of Economics ( email )

Gardner Hall, CB 3305
Chapel Hill, NC 27599
United States
919-966-5325 (Phone)
919-966-4986 (Fax)

HOME PAGE: http://www.unc.edu/~eghysels/

Andros Kourtellos

University of Cyprus - Department of Economics ( email )

75 Kallipoleos Street
P.O. Box 20537
1678 Nicosia
Cyprus

University of Bologna - Rimini Center for Economic Analysis (RCEA) ( email )

Via Patara, 3
Rimini (RN), RN 47900
Italy

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