Real-Time Tests of the Leading Economic Index: Do Changes in the Index Composition Matter?
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.
|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.|
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Web page: http://www.conference-board.org/publications/publicationlistall.cfm?sort=type#EconomicWorkingPaper
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- Maximo Camacho & Gabriel Perez-Quiros, 2000.
"This Is What The Leading Indicators Lead,"
Computing in Economics and Finance 2000
132, Society for Computational Economics.
- Robert H. McGuckin & Ataman Ozyildirim & Victor Zarnowitz, 2003.
"A More Timely and Useful Index of Leading Indicators,"
Economics Program Working Papers
03-01, The Conference Board, Economics Program.
- 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.
- Zarnowitz, Victor, 1992. "Business Cycles," National Bureau of Economic Research Books, University of Chicago Press, number 9780226978901.
- 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.
- 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.).
- Wesley Clair Mitchell & Arthur F. Burns, 1938. "Statistical Indicators of Cyclical Revivals," NBER Books, National Bureau of Economic Research, Inc, number mitc38-1, September.
- Geoffrey H. Moore, 1950. "Statistical Indicators of Cyclical Revivals and Recessions," NBER Books, National Bureau of Economic Research, Inc, number moor50-1, September.
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