Uncertainty of Macroeconomic Forecasters and the Prediction of Stock Market Bubbles

14 Pages Posted: 27 Aug 2014

See all articles by Helmut Herwartz

Helmut Herwartz

University of Goettingen (Gottingen)

Konstantin A. Kholodilin

German Institute for Economic Research (DIW Berlin)

Date Written: August 2014

Abstract

We assess the contribution of macroeconomic uncertainty - approximated by the dispersion of the real GDP survey forecasts - to the ex post and ex ante prediction of stock price bubbles. For a panel of six OECD economies covering 24 years, two alternative binary chronologies of bubble periods are determined and subjected to panel logit regressions conditioning on macroeconomic indicators and expectation uncertainty. Measures of macroeconomic uncertainty improve the ex ante signalling of stock price booms and bubbles.

Keywords: stock market bubbles, out-of-sample forecasting, consensus forecasts, macroeconomic uncertainty, OECD countries

JEL Classification: G01, G17, E27

Suggested Citation

Herwartz, Helmut and Kholodilin, Konstantin A., Uncertainty of Macroeconomic Forecasters and the Prediction of Stock Market Bubbles (August 2014). DIW Berlin Discussion Paper No. 1405. Available at SSRN: https://ssrn.com/abstract=2487762 or http://dx.doi.org/10.2139/ssrn.2487762

Helmut Herwartz

University of Goettingen (Gottingen) ( email )

Platz der Gottinger Sieben 3
Gottingen, D-37073
Germany

Konstantin A. Kholodilin (Contact Author)

German Institute for Economic Research (DIW Berlin) ( email )

Mohrenstraße 58
Berlin, 10117
Germany

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