41 Pages Posted: 13 Nov 2012 Last revised: 22 Mar 2014
Date Written: March 19, 2014
Macroeconomic data are typically subject to future revisions and released with delay. Predictive return regressions using such data therefore potentially overstate the information set available to investors in real time. We document that data revisions account for a sizable share of in-sample and out-of-sample predictive power for Treasury returns found in macroeconomic data. This is partly explained by the fact that information contained in revisions to prior months' releases is incorporated into bond prices. Survey forecasts available in real time contain information about future revised data that is orthogonal to the real-time data and also helps to predict bond returns.
Keywords: return predictability, real-time data, macroeconomic announcements, dynamic factor models
JEL Classification: G10, G12
Suggested Citation: Suggested Citation
Ghysels, Eric and Horan, Casidhe and Moench, Emanuel, Forecasting through the Rear-View Mirror: Data Revisions and Bond Return Predictability (March 19, 2014). FRB of New York Staff Report No. 581. Available at SSRN: https://ssrn.com/abstract=2175150 or http://dx.doi.org/10.2139/ssrn.2175150
By Andrew Ang