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Using Sentiment Surveys to Predict GDP Growth and Stock Returns

In: The Making of National Economic Forecasts

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  • Giselle Guzmán

Abstract

This important book, prepared under the direction of Nobel Laureate Lawrence R. Klein, shows how economic forecasts are made. It explains how modern developments in information technology have made it possible to forecast frequently – at least monthly but also weekly or bi-weekly – depending upon the perceived needs of potential forecast users and also on the availability of updated material.

Suggested Citation

  • Giselle Guzmán, 2009. "Using Sentiment Surveys to Predict GDP Growth and Stock Returns," Chapters, in: Lawrence R. Klein (ed.), The Making of National Economic Forecasts, chapter 12, Edward Elgar Publishing.
    • Handle: RePEc:elg:eechap:12861_12
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    References listed on IDEAS

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    1. Eric M. Leeper, 1992. "Consumer attitudes: king for a day," Economic Review, Federal Reserve Bank of Atlanta, issue Jul, pages 1-15.
    2. Carroll, Christopher D & Fuhrer, Jeffrey C & Wilcox, David W, 1994. "Does Consumer Sentiment Forecast Household Spending? If So, Why?," American Economic Review, American Economic Association, vol. 84(5), pages 1397-1408, December.
    3. Grossman, Sanford J & Stiglitz, Joseph E, 1980. "On the Impossibility of Informationally Efficient Markets," American Economic Review, American Economic Association, vol. 70(3), pages 393-408, June.
    4. Gregory W. Brown & Michael T. Cliff, 2005. "Investor Sentiment and Asset Valuation," The Journal of Business, University of Chicago Press, vol. 78(2), pages 405-440, March.
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    6. Chen, Nai-fu & Kan, Raymond & Miller, Merton H, 1993. "Are the Discounts on Closed-End Funds a Sentiment Index?," Journal of Finance, American Finance Association, vol. 48(2), pages 795-800, June.
    7. Jason Bram & Sydney C. Ludvigson, 1998. "Does consumer confidence forecast household expenditure? a sentiment index horse race," Economic Policy Review, Federal Reserve Bank of New York, vol. 4(Jun), pages 59-78.
    8. Lee, Charles M C & Shleifer, Andrei & Thaler, Richard H, 1991. "Investor Sentiment and the Closed-End Fund Puzzle," Journal of Finance, American Finance Association, vol. 46(1), pages 75-109, March.
    9. Jeff Dominitz & Charles F. Manski, 2003. "How Should We Measure Consumer Confidence (Sentiment)? Evidence from the Michigan Survey of Consumers," NBER Working Papers 9926, National Bureau of Economic Research, Inc.
    10. E. Philip Howrey, 2001. "The Predictive Power of the Index of Consumer Sentiment," Brookings Papers on Economic Activity, Economic Studies Program, The Brookings Institution, vol. 32(1), pages 175-216.
    11. Saul H. Hymans, 1970. "Consumer Durable Spending: Explanation and Prediction," Brookings Papers on Economic Activity, Economic Studies Program, The Brookings Institution, vol. 1(2), pages 173-206.
    12. Verma, Rahul & Verma, Priti, 2008. "Are survey forecasts of individual and institutional investor sentiments rational?," International Review of Financial Analysis, Elsevier, vol. 17(5), pages 1139-1155, December.
    13. Swaminathan, Bhaskaran, 1996. "Time-Varying Expected Small Firm Returns and Closed-End Fund Discounts," The Review of Financial Studies, Society for Financial Studies, vol. 9(3), pages 845-887.
    14. Lee, Wayne Y. & Jiang, Christine X. & Indro, Daniel C., 2002. "Stock market volatility, excess returns, and the role of investor sentiment," Journal of Banking & Finance, Elsevier, vol. 26(12), pages 2277-2299.
    15. Zweig, Martin E, 1973. "An Investor Expectations Stock Price Predictive Model Using Closed-End Fund Premiums," Journal of Finance, American Finance Association, vol. 28(1), pages 67-78, March.
    16. Joseph E. Stiglitz, 2011. "Rethinking Macroeconomics: What Failed, And How To Repair It," Journal of the European Economic Association, European Economic Association, vol. 9(4), pages 591-645, August.
    17. Stock, James H & Watson, Mark W, 2002. "Macroeconomic Forecasting Using Diffusion Indexes," Journal of Business & Economic Statistics, American Statistical Association, vol. 20(2), pages 147-162, April.
    18. Jon Elster, 1998. "Emotions and Economic Theory," Journal of Economic Literature, American Economic Association, vol. 36(1), pages 47-74, March.
    19. Richard H. Thaler, 2000. "From Homo Economicus to Homo Sapiens," Journal of Economic Perspectives, American Economic Association, vol. 14(1), pages 133-141, Winter.
    20. De Bondt, Werner P. M., 1993. "Betting on trends: Intuitive forecasts of financial risk and return," International Journal of Forecasting, Elsevier, vol. 9(3), pages 355-371, November.
    21. Chen, Nai-fu & Kan, Raymond & Miller, Merton H, 1993. "Are the Discounts on Closed-End Funds a Sentiment Index? A Rejoinder," Journal of Finance, American Finance Association, vol. 48(2), pages 809-810, June.
    22. Michael Lemmon & Evgenia Portniaguina, 2006. "Consumer Confidence and Asset Prices: Some Empirical Evidence," The Review of Financial Studies, Society for Financial Studies, vol. 19(4), pages 1499-1529.
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    Cited by:

    1. Giorgio Fagiolo & Andrea Roventini, 2017. "Macroeconomic Policy in DSGE and Agent-Based Models Redux: New Developments and Challenges Ahead," Journal of Artificial Societies and Social Simulation, Journal of Artificial Societies and Social Simulation, vol. 20(1), pages 1-1.
    2. repec:hal:spmain:info:hdl:2441/dcditnq6282sbu1u151qe5p7f is not listed on IDEAS
    3. Giorgio Fagiolo & Andrea Roventini, 2012. "Macroeconomic Policy in DSGE and Agent-Based Models," Revue de l'OFCE, Presses de Sciences-Po, vol. 0(5), pages 67-116.
    4. Guzman, Giselle C., 2010. "An inflation expectations horserace," MPRA Paper 36511, University Library of Munich, Germany.
    5. Joseph E. Stiglitz, 2011. "Rethinking Macroeconomics: What Failed, And How To Repair It," Journal of the European Economic Association, European Economic Association, vol. 9(4), pages 591-645, August.
    6. Guzman, Giselle C., 2011. "The case for higher frequency inflation expectations," MPRA Paper 36656, University Library of Munich, Germany.

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    More about this item

    Keywords

    Economics and Finance;

    JEL classification:

    • C51 - Mathematical and Quantitative Methods - - Econometric Modeling - - - Model Construction and Estimation
    • E21 - Macroeconomics and Monetary Economics - - Consumption, Saving, Production, Employment, and Investment - - - Consumption; Saving; Wealth
    • G00 - Financial Economics - - General - - - General
    • E47 - Macroeconomics and Monetary Economics - - Money and Interest Rates - - - Forecasting and Simulation: Models and Applications
    • E66 - Macroeconomics and Monetary Economics - - Macroeconomic Policy, Macroeconomic Aspects of Public Finance, and General Outlook - - - General Outlook and Conditions
    • D84 - Microeconomics - - Information, Knowledge, and Uncertainty - - - Expectations; Speculations
    • E17 - Macroeconomics and Monetary Economics - - General Aggregative Models - - - Forecasting and Simulation: Models and Applications
    • E44 - Macroeconomics and Monetary Economics - - Money and Interest Rates - - - Financial Markets and the Macroeconomy
    • O40 - Economic Development, Innovation, Technological Change, and Growth - - Economic Growth and Aggregate Productivity - - - General
    • G01 - Financial Economics - - General - - - Financial Crises

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