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Forecasting through the rear-view mirror: data revisions and bond return predictability

  • Eric Ghysels
  • Casidhe Horan
  • Emanuel Moench

Real-time macroeconomic data reflect the information available to market participants, whereas final data—containing revisions and released with a delay—overstate the information set available to them. We document that the in-sample and out-of-sample Treasury return predictability is significantly diminished when real-time as opposed to revised macroeconomic data are used. In fact, much of the predictive information in macroeconomic time series is due to the data revision and publication lag components.

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Paper provided by Federal Reserve Bank of New York in its series Staff Reports with number 581.

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Date of creation: 2012
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Handle: RePEc:fip:fednsr:581
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  1. Aruoba, Boragan, 2005. "Data Revisions Are Not Well-Behaved," CEPR Discussion Papers 5271, C.E.P.R. Discussion Papers.
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  4. Evan Koenig & Sheila Dolmas & Jeremy M. Piger, 2002. "The use and abuse of 'real-time' data in economic forecasting," Working Papers 2001-015, Federal Reserve Bank of St. Louis.
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  9. Christoffersen, Peter & Ghysels, Eric & Swanson, Norman R., 2002. "Let's get "real" about using economic data," Journal of Empirical Finance, Elsevier, vol. 9(3), pages 343-360, August.
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  15. Gilbert, Thomas, 2011. "Information aggregation around macroeconomic announcements: Revisions matter," Journal of Financial Economics, Elsevier, vol. 101(1), pages 114-131, July.
  16. Tobias Adrian & Emanuel Moench, 2008. "Pricing the term structure with linear regressions," Staff Reports 340, Federal Reserve Bank of New York.
  17. Dean Croushore & Tom Stark, 1999. "A real-time data set for macroeconomists," Working Papers 99-4, Federal Reserve Bank of Philadelphia.
  18. Stock J.H. & Watson M.W., 2002. "Forecasting Using Principal Components From a Large Number of Predictors," Journal of the American Statistical Association, American Statistical Association, vol. 97, pages 1167-1179, December.
  19. Fama, Eugene F & Bliss, Robert R, 1987. "The Information in Long-Maturity Forward Rates," American Economic Review, American Economic Association, vol. 77(4), pages 680-92, September.
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