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Real-Time Tests of the Leading Economic Index: Do Changes in the Index Composition Matter?

  • Robert H. McGuckin

    (The Conference Board)

  • Ataman Ozyildirim

    ()

    (The Conference Board)

This paper reports real-time out-of-sample tests of the ability of the U.S. Index Leading Economic Indicators (LEI) to forecast the economy using "composition-changing" "as-published" versions of the LEI. It is an extension of recent work that focused on forecasts with a "composition-constant" LEI. The results demonstrate that the LEI helps forecasts and compositional change in the LEI does not account for poor real-time out-of-sample forecast performance found in earlier work. Reviews of the historical record reinforce the findings.

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File URL: http://www.conference-board.org/economics/workingpapers.cfm?pdf=E-0012-03-WP
File Function: First version, 2003
Download Restriction: no

Paper provided by The Conference Board, Economics Program in its series Economics Program Working Papers with number 03-04.

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Length: 32 pages
Date of creation: Jun 2003
Date of revision:
Publication status: Published in Journal of Business Cycle Measurement and Analysis, Vol. 1, No. 2, June 2004, pages 171-92.
Handle: RePEc:cnf:wpaper:0304
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  1. Hamilton, James D & Perez-Quiros, Gabriel, 1996. "What Do the Leading Indicators Lead?," The Journal of Business, University of Chicago Press, vol. 69(1), pages 27-49, January.
  2. Maximo Camacho & Gabriel Perez-Quiros, 2002. "This is what the leading indicators lead," Journal of Applied Econometrics, John Wiley & Sons, Ltd., vol. 17(1), pages 61-80.
  3. McGuckin, Robert H. & Ozyildirim, Ataman & Zarnowitz, Victor, 2007. "A More Timely and Useful Index of Leading Indicators," Journal of Business & Economic Statistics, American Statistical Association, vol. 25, pages 110-120, January.
  4. Geoffrey H. Moore, 1950. "Statistical Indicators of Cyclical Revivals and Recessions," NBER Books, National Bureau of Economic Research, Inc, number moor50-1, December.
  5. Wesley Clair Mitchell & Arthur F. Burns, 1938. "Statistical Indicators of Cyclical Revivals," NBER Books, National Bureau of Economic Research, Inc, number mitc38-1, December.
  6. Francis X. Diebold & Glenn D. Rudebusch, 1989. "Forecasting output with the composite leading index: an ex ante analysis," Finance and Economics Discussion Series 90, Board of Governors of the Federal Reserve System (U.S.).
  7. Zarnowitz, Victor, 1992. "Business Cycles," National Bureau of Economic Research Books, University of Chicago Press, number 9780226978901.
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