What's Good for Toyota...?

NRG Working Paper No. 06-12

20 Pages Posted: 3 Oct 2006

See all articles by Ivo J.M. Arnold

Ivo J.M. Arnold

Nyenrode University; Erasmus University Rotterdam (EUR) - Erasmus School of Economics (ESE)

John Galakis

ABN AMRO, The Netherlands

Date Written: August 2006

Abstract

Since long the auto industry has been a valued source of leading business cycle indicators. While practitioners continue to use data on new car registrations to forecast economic activity, the predictive performance of auto industry related stock returns has deteriorated in the past decades. For the US this can be traced to the advent of Japanese manufacturers. The increased US market penetration by Japanese automakers coincides with a decline in the predictive ability of domestic auto returns. We are, however, able to recover a role for auto returns in business cycle forecasting by employing Japanese data. No such result can be found for European countries. We do conclude, however, that what's good for Toyota, is good for the world economy.

Keywords: Forecasting, Business Cycle, Financial Markets

JEL Classification: E32, E37, E44

Suggested Citation

Arnold, Ivo J.M. and Galakis, John, What's Good for Toyota...? (August 2006). NRG Working Paper No. 06-12, Available at SSRN: https://ssrn.com/abstract=934508 or http://dx.doi.org/10.2139/ssrn.934508

Ivo J.M. Arnold (Contact Author)

Nyenrode University ( email )

3621 BG Breukelen
Netherlands
+31-346-291270 (Phone)
+31-346-291250 (Fax)

Erasmus University Rotterdam (EUR) - Erasmus School of Economics (ESE) ( email )

P.O. Box 1738
3000 DR Rotterdam, NL 3062 PA
Netherlands

John Galakis

ABN AMRO, The Netherlands ( email )

NL-1000 EA Amsterdam
Netherlands