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Let's Get "Real" about Using Economic Data

  • Peter Christoffersen
  • Eric Ghysels
  • Norman R. Swanson

We show that using data which are properly available in real time when assessing the sensitivity of asset prices to economic news leads to different empirical findings than when data availability and timing issues are ignored. We do this by focusing on a particular example, namely Chen, Roll and Ross (1986), and examine whether innovations to economic variables can be viewed as risks that are rewarded in asset markets. Our findings support the view that data uncertainty is sufficiently prevalent to warrant careful use of real-time data when forming real-time news measures, and in general when undertaking empirical financial investigations involving macroeconomic data.

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Paper provided by Economic Policy Research Unit (EPRU), University of Copenhagen. Department of Economics in its series EPRU Working Paper Series with number 01-15.

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Handle: RePEc:kud:epruwp:01-15
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  1. 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.
  2. Newey, Whitney & West, Kenneth, 2014. "A simple, positive semi-definite, heteroscedasticity and autocorrelation consistent covariance matrix," Applied Econometrics, Publishing House "SINERGIA PRESS", vol. 33(1), pages 125-132.
  3. Swanson, N.R. & White, H., 1995. "A Models Selection Approach to Real-Time Macroeconomic Forecasting Using Linear Models and Artificial Neural Networks," Papers 04-95-12, Pennsylvania State - Department of Economics.
  4. 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.
  5. Campbell, John Y, 1996. "Understanding Risk and Return," Journal of Political Economy, University of Chicago Press, vol. 104(2), pages 298-345, April.
  6. Keane, Michael & Runkle, David E, 1995. "Testing the Rationality of Price Forecasts: Reply," American Economic Review, American Economic Association, vol. 85(1), pages 290, March.
  7. Pierce, David A., 1981. "Sources of error in economic time series," Journal of Econometrics, Elsevier, vol. 17(3), pages 305-321, December.
  8. Pearce, Douglas K & Roley, V Vance, 1985. "Stock Prices and Economic News," The Journal of Business, University of Chicago Press, vol. 58(1), pages 49-67, January.
  9. Myles Callan & Eric Ghysels & Norman R. Swanson, 1998. "Monetary Policy Rules with Model and Data Uncertainty," CIRANO Working Papers 98s-40, CIRANO.
  10. Swanson, N.R., 1996. "Forecasting Using First Available Versus Fully Revised Economic Time Series data," Papers 4-96-7, Pennsylvania State - Department of Economics.
  11. 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.
  12. Lamont, Owen A., 2001. "Economic tracking portfolios," Journal of Econometrics, Elsevier, vol. 105(1), pages 161-184, November.
  13. G. William Schwert, 1990. "Stock Returns and Real Activity: A Century of Evidence," NBER Working Papers 3296, National Bureau of Economic Research, Inc.
  14. 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.
  15. Fama, Eugene F, 1990. " Stock Returns, Expected Returns, and Real Activity," Journal of Finance, American Finance Association, vol. 45(4), pages 1089-1108, September.
  16. Charles M. Jones & Owen Lamont & Robin L. Lumsdaine, . "Macroeconomic News and Bond Market Volatility," CRSP working papers 333, Center for Research in Security Prices, Graduate School of Business, University of Chicago.
  17. 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.
  18. 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.
  19. 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.).
  20. repec:cup:cbooks:9780521565882 is not listed on IDEAS
  21. Croushore, Dean & Stark, Tom, 2001. "A real-time data set for macroeconomists," Journal of Econometrics, Elsevier, vol. 105(1), pages 111-130, November.
  22. 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.
  23. 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.
  24. Fair, Ray C & Shiller, Robert J, 1990. "Comparing Information in Forecasts from Econometric Models," American Economic Review, American Economic Association, vol. 80(3), pages 375-89, June.
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