From stocks to luxury watches: assessing the role of alternative economic indicators in macroeconomic forecasting

In the current study, two monetary models are developed and tested for their forecasting ability using vector autoregression and high-frequency data. The sole difference between the two VAR models is that the first employs key economic indices, while the second replaces the S&P 500 index with an index reflecting Rolex watch prices in the secondary market. According to the analysis, the alternative model outperforms both in static and dynamic forecasting during a period marked by extreme volatility caused by the shock of the pandemic. In contrast, it significantly loses its forecasting ability when estimated under normal conditions prior to the onset of the pandemic. This novel approach shows that alternative indicators, like the price of luxury watches, can offer timely insights into consumer confidence and market circumstances during times of economic turbulence.