Forecasting U.S. recessions using over 150 years of data
Stock-market moments versus oil-market moments
Publication date
2024-09-30
Document type
Forschungsartikel
Author
Organisational unit
Scopus ID
Publisher
Elsevier
Series or journal
Finance Research Letters
ISSN
Periodical volume
69, Part B
Article ID
106179
Is a version of
Peer-reviewed
✅
Part of the university bibliography
✅
Language
English
Keyword
AUC statistics
Forecasting
Recessions
Shrinkage estimators
Stock-market and oil-market moments
Abstract
Using monthly data from 1871 to 2024 and logistic models with shrinkage estimators, we compare the contribution of stock and oil-market moments (returns, volatility, skewness, and kurtosis) to the accuracy of out-of-sample forecasts of U.S. recessions at various forecast horizons, while controlling for standard macroeconomic predictors and the total connectedness indexes of the moments. Adding stock-market moments to the potential predictors improves significantly the accuracy of out-of-sample forecasts at an intermediate forecast horizon, where the lagged recession dummy, term spread, and stock returns are top predictors. Oil-market moments and connectedness indexes do not contribute much to forecast accuracy.
Version
Published version
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