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Further evidence on financial information and economic activity forecasts in the United States

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  • Shi, Qi
  • Li, Bin

Abstract

Our study provides substantially robust evidence for the predictive power of financial variables in forecasting the business cycle at a further step. We select several interesting and representative financial variables and reveal that they can predict significant information regarding future equity premiums as well as future macroeconomic activity, which are proxied by comprehensive fresh macroeconomic variables. The predictive power remains stable in out-of-sample estimations and can generate profits in an active market-timing trading strategy in excess of the historical mean forecast strategy. Cochrane provides one of the core interpretations for such forecasts in the theoretical asset pricing framework.

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  • Shi, Qi & Li, Bin, 2022. "Further evidence on financial information and economic activity forecasts in the United States," The North American Journal of Economics and Finance, Elsevier, vol. 60(C).
    • Handle: RePEc:eee:ecofin:v:60:y:2022:i:c:s1062940822000079
    DOI: 10.1016/j.najef.2022.101647
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    More about this item

    Keywords

    Substantially robust evidence; Predictive power; Future macroeconomic activity; Generate profits; Theoretical asset pricing framework;
    All these keywords.

    JEL classification:

    • G12 - Financial Economics - - General Financial Markets - - - Asset Pricing; Trading Volume; Bond Interest Rates

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