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Market-Based Solutions to Vital Economic Issues
Research
Feb 1, 2013

Should Macroeconomic Forecasters Use Daily Financial Data and How?

Abstract

We introduce easy to implement regression-based methods for predicting quarterly real economic activity that use daily financial data. Our analysis is designed to elucidate the value of daily information and provide real-time forecast updates of the current (nowcasting) and future quarters. Our findings show that while on average the predictive ability of all models worsens substantially following the financial crisis, the models we propose suffer relatively less losses. Moreover, these predictive gains are primarily driven by the asset classes of government securities, equities, and especially corporate risk.

Note: Research papers posted on SSRN, including any findings, may differ from the final version chosen for publication in academic journals.


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