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The real-time macro content of corporate financial reports: A dynamic factor model approach

Author

Listed:
  • Abdalla, Ahmed M.
  • Carabias, Jose M.
  • Patatoukas, Panos N.

Abstract

We use a standard dynamic factor model to extract new factors based on the real-time flow of accounting data from the corporate financial reports. The extracted accounting factors exploit across-sector comovements in corporate value creation drivers and can be used together with other closely watched economic indicators. We show that our weekly updated accounting factors are incrementally relevant for nowcasting and forecasting major components of economic output in the BEA's National Income and Product Accounts. Overall, our paper pioneers a new approach to incorporating the continuous flow of accounting data within the context of dynamic factor models.

Suggested Citation

  • Abdalla, Ahmed M. & Carabias, Jose M. & Patatoukas, Panos N., 2021. "The real-time macro content of corporate financial reports: A dynamic factor model approach," Journal of Monetary Economics, Elsevier, vol. 118(C), pages 260-280.
    • Handle: RePEc:eee:moneco:v:118:y:2021:i:c:p:260-280
    DOI: 10.1016/j.jmoneco.2021.01.006
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    More about this item

    Keywords

    Corporate financial reports; Nowcasting; Forecasting; Macro accounting;
    All these keywords.

    JEL classification:

    • E01 - Macroeconomics and Monetary Economics - - General - - - Measurement and Data on National Income and Product Accounts and Wealth; Environmental Accounts
    • E32 - Macroeconomics and Monetary Economics - - Prices, Business Fluctuations, and Cycles - - - Business Fluctuations; Cycles
    • E60 - Macroeconomics and Monetary Economics - - Macroeconomic Policy, Macroeconomic Aspects of Public Finance, and General Outlook - - - General
    • M41 - Business Administration and Business Economics; Marketing; Accounting; Personnel Economics - - Accounting - - - Accounting

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