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Let's Get "Real" About Using Economic Data

  • Peter Christoffersen

    (McGill University and CIRANO)

  • Eric Ghysels

    (University of North Carolina and CIRANO)

  • Norman Swanson

    (Texas A & M University)

Breeden, Gibbons and Litzenberger (1989), and Lamont (1999), use "economic tracking portfolios" to forecast macroeconomic data. Tracking portfolios are constructed to reflect market expectations and reveal the impact of news. However, these papers, as well as many related studies which examine the market impact of macroeconomic news, use "currently available" macroeconomic data. The combination of various different "vintages" of economic data has several important and undesirable consequences, particularly when the timing of information and its impact on financial markets is the focus of investigation. We therefore use a real-time macroeconomic data set to accurately mimic the accumulation of macroeconomic information in real time. We attempt to shed new light on the methodology used to construct tracking portfolios, as well as on the impact of macroeconomic news on financial markets. In addition, we address a number of related questions, including: Does the data revision process itself have an impact on financial markets? Do market participants: (i) care about "final" releases of macroeconomic variables; or (ii) form their decisions based on preliminary data; or (iii) instead form their decisions by using vintages of data which they assume correspond to those vintages used by public policy decision-makers?

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Paper provided by Econometric Society in its series Econometric Society World Congress 2000 Contributed Papers with number 1004.

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Date of creation: 01 Aug 2000
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Handle: RePEc:ecm:wc2000:1004
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  1. Campbell, John, 1996. "Understanding Risk and Return," Scholarly Articles 3153293, Harvard University Department of Economics.
  2. Charles M. Jones & Owen Lamont & Robin Lumsdaine, 1996. "Macroeconomic News and Bond Market Volatility," Home Pages _005, Princeton University, Department of Economics.
  3. Schwert, G William, 1981. "The Adjustment of Stock Prices to Information about Inflation," Journal of Finance, American Finance Association, vol. 36(1), pages 15-29, March.
  4. Kavajecz, Kenneth & Collins, Sean, 1995. "Rationality of Preliminary Money Stock Estimates," The Review of Economics and Statistics, MIT Press, vol. 77(1), pages 32-41, February.
  5. G. William Schwert, 1990. "Stock Returns and Real Activity: A Century of Evidence," NBER Working Papers 3296, National Bureau of Economic Research, Inc.
  6. Douglas K. Pearce & V. Vance Roley, 1985. "Stock Prices and Economic News," NBER Working Papers 1296, National Bureau of Economic Research, Inc.
  7. Fama, Eugene F & MacBeth, James D, 1973. "Risk, Return, and Equilibrium: Empirical Tests," Journal of Political Economy, University of Chicago Press, vol. 81(3), pages 607-36, May-June.
  8. Swanson Norman, 1996. "Forecasting Using First-Available Versus Fully Revised Economic Time-Series Data," Studies in Nonlinear Dynamics & Econometrics, De Gruyter, vol. 1(1), pages 1-20, April.
  9. Lamont, Owen A., 2001. "Economic tracking portfolios," Journal of Econometrics, Elsevier, vol. 105(1), pages 161-184, November.
  10. Mitchell, Mark L & Mulherin, J Harold, 1994. " The Impact of Public Information on the Stock Market," Journal of Finance, American Finance Association, vol. 49(3), pages 923-50, July.
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  12. Fama, Eugene F, 1990. " Stock Returns, Expected Returns, and Real Activity," Journal of Finance, American Finance Association, vol. 45(4), pages 1089-1108, September.
  13. Breeden, Douglas T & Gibbons, Michael R & Litzenberger, Robert H, 1989. " Empirical Tests of the Consumption-Oriented CAPM," Journal of Finance, American Finance Association, vol. 44(2), pages 231-62, June.
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  16. Norman R. Swanson & Halbert White, 1995. "A Model Selection Approach to Real-Time Macroeconomic Forecasting Using Linear Models and Artificial Neural Networks," Macroeconomics 9503004, EconWPA.
  17. Chen, Nai-Fu & Roll, Richard & Ross, Stephen A, 1986. "Economic Forces and the Stock Market," The Journal of Business, University of Chicago Press, vol. 59(3), pages 383-403, July.
  18. Pierce, David A., 1981. "Sources of error in economic time series," Journal of Econometrics, Elsevier, vol. 17(3), pages 305-321, December.
  19. Myles Callan & Eric Ghysels & Norman R. Swanson, 1998. "Monetary Policy Rules with Model and Data Uncertainty," CIRANO Working Papers 98s-40, CIRANO.
  20. Croushore, Dean & Stark, Tom, 2001. "A real-time data set for macroeconomists," Journal of Econometrics, Elsevier, vol. 105(1), pages 111-130, November.
  21. Whitney K. Newey & Kenneth D. West, 1986. "A Simple, Positive Semi-Definite, Heteroskedasticity and AutocorrelationConsistent Covariance Matrix," NBER Technical Working Papers 0055, National Bureau of Economic Research, Inc.
  22. Maravall, Agustin & Pierce, David A, 1986. "The Transmission of Data Noise into Policy Noise in U.S. Monetary Control," Econometrica, Econometric Society, vol. 54(4), pages 961-79, July.
  23. 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.).
  24. Fama, Eugene F. & French, Kenneth R., 1989. "Business conditions and expected returns on stocks and bonds," Journal of Financial Economics, Elsevier, vol. 25(1), pages 23-49, November.
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