The Composite Index of Leading Economic Indicators: How to Make it More Timely
AbstractA major shortcoming of the U.S. leading index is that it does not use the most recent information for stock prices and yield spreads. The index methodology ignores these data in favor of a time-consistent set of components (i.e., all of the components must refer to the previous month). An alternative is to bring the series with publication lags up-to-date with forecasts and create an index with a complete set of most recent components. This study uses tests of ex-ante predictive ability of the U.S. leading index to evaluate the gains to this new "hot box" procedure of statistical imputation. We find that, across a variety of simple forecasting models, the new approach offers substantial improvements.
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Bibliographic InfoPaper provided by The Conference Board, Economics Program in its series Economics Program Working Papers with number 00-04.
Length: 32 pages
Date of creation: Nov 2000
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More information through EDIRC
business cycle; indicators; leading index; times series; forecasting;
Other versions of this item:
- Robert H. McGuckin & Ataman Ozyildirim & Victor Zarnowitz, 2001. "The Composite Index of Leading Economic Indicators: How to Make It More Timely," NBER Working Papers 8430, National Bureau of Economic Research, Inc.
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