IDEAS home Printed from https://ideas.repec.org/p/fip/fedlwp/2003-007.html
   My bibliography  Save this paper

On the real-time forecasting ability of the consumption-wealth ratio

Author

Listed:
  • Hui Guo

Abstract

Lettau and Ludvigson (2001a) show that the consumption-wealth ratio-the error term from the cointegration relation among consumption, net worth, and labor income-forecasts stock market returns out of sample. In this paper, we reexamine their evidence using real-time data. Consistent with the early authors, we find that consumption and labor income data are subject to substantial revisions, which reflect (1) incorporating new information or methodologies and (2) reducing noise. Consequently, in contrast with the results obtained from the current vintage, the out-of-sample forecasting power of the consumption-wealth ratio is found to be negligible in real time. (Earlier version titled: Does the consumption-wealth ratio forecast stock market returns in real time?

Suggested Citation

  • Hui Guo, 2003. "On the real-time forecasting ability of the consumption-wealth ratio," Working Papers 2003-007, Federal Reserve Bank of St. Louis.
  • Handle: RePEc:fip:fedlwp:2003-007
    as

    Download full text from publisher

    File URL: http://research.stlouisfed.org/wp/more/2003-007/
    Download Restriction: no

    File URL: http://research.stlouisfed.org/wp/2003/2003-007.pdf
    Download Restriction: no

    Citations

    Citations are extracted by the CitEc Project, subscribe to its RSS feed for this item.
    as


    Cited by:

    1. Pierdzioch, Christian & Döpke, Jörg & Hartmann, Daniel, 2008. "Forecasting stock market volatility with macroeconomic variables in real time," Journal of Economics and Business, Elsevier, vol. 60(3), pages 256-276.
    2. Hui Guo & Jason Higbee, 2006. "Market timing with aggregate and idiosyncratic stock volatilities," Working Papers 2005-073, Federal Reserve Bank of St. Louis.
    3. Döpke, Jörg & Hartmann, Daniel & Pierdzioch, Christian, 2008. "Real-time macroeconomic data and ex ante stock return predictability," International Review of Financial Analysis, Elsevier, vol. 17(2), pages 274-290.

    More about this item

    Keywords

    Stock market ; Asset pricing;

    NEP fields

    This paper has been announced in the following NEP Reports:

    Statistics

    Access and download statistics

    Corrections

    All material on this site has been provided by the respective publishers and authors. You can help correct errors and omissions. When requesting a correction, please mention this item's handle: RePEc:fip:fedlwp:2003-007. See general information about how to correct material in RePEc.

    For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: (Kathy Cosgrove). General contact details of provider: http://edirc.repec.org/data/frbslus.html .

    If you have authored this item and are not yet registered with RePEc, we encourage you to do it here. This allows to link your profile to this item. It also allows you to accept potential citations to this item that we are uncertain about.

    We have no references for this item. You can help adding them by using this form .

    If you know of missing items citing this one, you can help us creating those links by adding the relevant references in the same way as above, for each refering item. If you are a registered author of this item, you may also want to check the "citations" tab in your RePEc Author Service profile, as there may be some citations waiting for confirmation.

    Please note that corrections may take a couple of weeks to filter through the various RePEc services.

    IDEAS is a RePEc service hosted by the Research Division of the Federal Reserve Bank of St. Louis . RePEc uses bibliographic data supplied by the respective publishers.