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Spreads versus professional forecasters as predictors of future output change

Author

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  • Kevin Aretz

    (Department of Accounting and Finance, Lancaster University, Lancaster, UK)

  • David A. Peel

    (Department of Economics, Lancaster University, Lancaster, UK)

Abstract

We examine whether real output forecasts obtained from the Survey of Professional Forecasters efficiently embody information in the term structure spread. To this end, we employ revised data as well as real-time vintage data, and we also allow for the possible impact of asymmetric loss functions. Assuming quadratic loss, our results suggest that the term structure spread does contain information useful for forecasting not reflected in the survey forecasts, at least over the longest forecast horizon. However, if we allow agents' loss functions to become more negatively skewed with the forecast horizon, then we cannot reject the rationality of the survey forecasts. Copyright © 2009 John Wiley & Sons, Ltd.

Suggested Citation

  • Kevin Aretz & David A. Peel, 2010. "Spreads versus professional forecasters as predictors of future output change," Journal of Forecasting, John Wiley & Sons, Ltd., vol. 29(6), pages 517-522.
  • Handle: RePEc:jof:jforec:v:29:y:2010:i:6:p:517-522
    DOI: 10.1002/for.1136
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    File URL: http://hdl.handle.net/10.1002/for.1136
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    References listed on IDEAS

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    11. Ashoka Mody & Mark P. Taylor, 2003. "The High-Yield Spread as a Predictor of Real Economic Activity: Evidence of a Financial Accelerator for the United States," IMF Staff Papers, Palgrave Macmillan, vol. 50(3), pages 1-3.
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    Cited by:

    1. Chrystalleni Aristidou & Kevin Lee & Kalvinder Shields, 2015. "Real-Time Data should be used in Forecasting Output Growth and Recessionary Events in the US," Discussion Papers 2015/13, University of Nottingham, Centre for Finance, Credit and Macroeconomics (CFCM).

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