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Which daily equity returns improve output forecasts?

Author

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  • Jahan-Pavar, Mohammad R.
  • Lang, William J.

Abstract

We document the improvements in short term forecasts of real output growth for the United States and the euro area from incorporating daily financial data and using mixed data sampling (MIDAS) regressions. Furthermore, we show that a significant share of forecast improvements are driven by information embedded in stock returns of large, capital-intensive firms. In comparison, labor-intensive firms contribute less to improvements in output forecasts within a MIDAS framework.

Suggested Citation

  • Jahan-Pavar, Mohammad R. & Lang, William J., 2024. "Which daily equity returns improve output forecasts?," Economics Letters, Elsevier, vol. 243(C).
    • Handle: RePEc:eee:ecolet:v:243:y:2024:i:c:s0165176524003811
    DOI: 10.1016/j.econlet.2024.111897
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    More about this item

    Keywords

    Mixed-frequency data sampling regressions; Forecasting; High-frequency financial data; Capital- and labor-intensive industry equity returns;
    All these keywords.

    JEL classification:

    • C22 - Mathematical and Quantitative Methods - - Single Equation Models; Single Variables - - - Time-Series Models; Dynamic Quantile Regressions; Dynamic Treatment Effect Models; Diffusion Processes
    • E27 - Macroeconomics and Monetary Economics - - Consumption, Saving, Production, Employment, and Investment - - - Forecasting and Simulation: Models and Applications
    • G17 - Financial Economics - - General Financial Markets - - - Financial Forecasting and Simulation

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