Testing for News and Noise in Non-Stationary Time Series Subject to Multiple Historical Revisions

28 Pages Posted: 12 Apr 2019

See all articles by Alain Hecq

Alain Hecq

Maastricht University - Department of Quantitative Economics

Jan P. A. M. Jacobs

University of Groningen - Faculty of Economics and Business

Michalis P. Stamatogiannis

University of Liverpool Management School

Date Written: February 2019

Abstract

This paper focuses on testing non-stationary real-time data for forecastability, i.e., whether data revisions reduce noise or are news, by putting data releases in vector-error correction forms. To deal with historical revisions which affect the whole vintage of time series due to redefinitions, methodological innovations etc., we employ the recently developed impulse indicator saturation approach, which involves potentially adding an indicator dummy for each observation to the model. We illustrate our procedures with the U.S. real GNP/GDP series of the Federal Reserve Bank of Philadelphia and find that revisions to this series neither reduce noise nor can be considered as news.

Keywords: data revision, cointegration, news-noise tests, outlier detection

JEL Classification: C32, C82, E01

Suggested Citation

Hecq, Alain and Jacobs, Jan P.A.M. and Stamatogiannis, Michalis P., Testing for News and Noise in Non-Stationary Time Series Subject to Multiple Historical Revisions (February 2019). Available at SSRN: https://ssrn.com/abstract=3354765 or http://dx.doi.org/10.2139/ssrn.3354765

Alain Hecq

Maastricht University - Department of Quantitative Economics ( email )

P.O. Box 616
Maastricht, 6200 MD
Netherlands

HOME PAGE: http://www.maastrichtuniversity.nl/a.hecq

Jan P.A.M. Jacobs

University of Groningen - Faculty of Economics and Business ( email )

Postbus 72
9700 AB Groningen
Netherlands

Michalis P. Stamatogiannis (Contact Author)

University of Liverpool Management School ( email )

Chatham Street
Liverpool, L69 7ZH
United Kingdom

HOME PAGE: http://https://www.liverpool.ac.uk/management/staff/michail-stamatogiannis/

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