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Changes in Predictive Ability with Mixed Frequency Data.” Working Paper No

By Ana Beatriz Galvão

Abstract

This paper proposes a new regression model — a smooth transition mixed data sampling (STMIDAS) approach — that captures recurrent changes in the ability of a high frequency variable in predicting a variable only available at lower frequency. The model is applied to the use of …nancial variables, such as the slope of the yield curve, the short-rate and stock returns, to forecast US output growth both in- and out-of-sample. I …nd evidence that the use of the predictor sampled weekly improves output growth forecasts, which may also be improved when changes in …nancial variables’predictive power are considered

Topics: Key words, smooth transition, MIDAS, predictive ability, asset prices, output growth JEL codes, C22, C53, E44 1 2
Year: 2007
OAI identifier: oai:CiteSeerX.psu:10.1.1.192.6453
Provided by: CiteSeerX
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