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Are economic tracking portfolios useful for forecasting output and inflation in Austria?

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  • Burkhard Raunig

Abstract

We construct economic tracking portfolios from Austrian stock market returns, euro/dollar exchange rate changes and changes in the oil price to extract revisions of market expectations about future industrial production growth and inflation in Austria. The forecasting ability of the portfolios is evaluated in-sample and in a pseudo out-of-sample forecasting experiment. It turns out that the tracking portfolios track both target variables in-sample. The portfolios also help to forecast annual industrial production growth out-of-sample. The predictive ability of the tracking portfolios for inflation is rather low.

Suggested Citation

  • Burkhard Raunig, 2007. "Are economic tracking portfolios useful for forecasting output and inflation in Austria?," Applied Financial Economics, Taylor & Francis Journals, vol. 17(13), pages 1043-1049.
    • Handle: RePEc:taf:apfiec:v:17:y:2007:i:13:p:1043-1049
    DOI: 10.1080/09603100600749246
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    References listed on IDEAS

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    1. Mr. Torsten M Sloek & Mr. Peter F. Christoffersen, 2000. "Do Asset Prices in Transition Countries Contain Information About Future Economic Activity?," IMF Working Papers 2000/103, International Monetary Fund.
    2. Francis X. Diebold & Jose A. Lopez, 1995. "Forecast evaluation and combination," Research Paper 9525, Federal Reserve Bank of New York.
    3. repec:zbw:bofrdp:2002_002 is not listed on IDEAS
    4. Simon Hayes, 2001. "Leading indicator information in UK equity prices: an assessment of economic tracking portfolios," Bank of England working papers 137, Bank of England.
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    Cited by:

    1. Javier Gomez-Biscarri, 2009. "The predictive power of the term spread revisited: a change in the sign of the predictive relationship," Applied Financial Economics, Taylor & Francis Journals, vol. 19(14), pages 1131-1142.

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