Economic Tracking Portfolios

57 Pages Posted: 18 Aug 2000 Last revised: 16 Apr 2008

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 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 US 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.

Suggested Citation

Lamont, Owen A., Economic Tracking Portfolios (March 1999). NBER Working Paper No. w7055. Available at SSRN: https://ssrn.com/abstract=227420

Owen A. Lamont (Contact Author)

Harvard University - Department of Economics ( email )

Littauer Center
Cambridge, MA 02138
United States

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