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Should macroeconomic forecasters use daily financial data and how?

Listed author(s):
  • Elena Andreou
  • Eric Ghysels
  • Andros Kourtellos

We introduce easy to implement regression-based methods for predicting quarterly real economic activity that use daily financial data and rely on forecast combinations of MIDAS regressions. Our analysis is designed to elucidate the value of daily information and provide real-time forecast updates of the current (nowcasting) and future quarters. Our findings show that while on average the predictive ability of all models worsens substantially following the financial crisis, the models we propose suffer relatively less losses than the traditional ones. Moreover, these predictive gains are primarily driven by the classes of government securities, equities, and especially corporate risk.

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File URL: http://papers.econ.ucy.ac.cy/RePEc/papers/09-10.pdf
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Paper provided by University of Cyprus Department of Economics in its series University of Cyprus Working Papers in Economics with number 09-2010.

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Length: 67 pages
Date of creation: Nov 2010
Handle: RePEc:ucy:cypeua:09-2010
Contact details of provider: Web page: http://www.ucy.ac.cy/econ/en

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