A0663
Title: Forecasting GDP growth using stock returns in Japan: A factor-augmented MIDAS approach
Authors: Hiroshi Morita - Tokyo Institute of Technology (Japan) [presenting]
Abstract: Using the rich time-series and cross-sectional information of the stock market, the purpose is to examine which dimensions of information contribute to the accuracy of GDP growth rate forecasts. Methodologically, MIDAS (mixed data sampling) regression analysis is combined with factor analysis and applied to the Japanese economy. The results reveal that the use of factors significantly improves forecast accuracy and that extracting factors from a broader set of stock prices further improves accuracy, suggesting the important role of cross-sectional stock market information in forecasting macroeconomic activity.
