Firm'investment forecast: An indicator of changes in expectations in industrial investment survey

Abstract

The quarterly industrial investment survey constitutes one of the main sources of information for the short-term economic analysis of industrial firms investment. However, its main questions are annual. Therefore, the use of this surveys results for the forecasting of investment on a quarterly basis requires some specific statistical treatment. This paper presents a quarterly indicator based on the changes in industrial entrepreneurs expectations as regards annual investment. This indicator derives from the estimation of the successive adaptations of entrepreneurs investment plans as times goes by, depending on the evolutions of short-term macroeconomic activity ; it proves to be strongly correlated with the fluctuations of the entrepreneurs investment growth rate (as is measured in the French Quarterly Accounts). Moreover, the indicator is available about three months ahead with respect to the first results release of the quarterly national accounts. The probability distributions of changes in expectations are not gaussian (due to heavy tails and strong concentrations near zero). Consequently, robust estimation methods for extreme observations were performed. Due to the presence of heteroskedasticity, we choosed to apply the Quasi-Generalized M-estimator» method.Firms investment, short-term forecasting, business tendency surveys, extreme values, adaptive M-regression, Quasi-Generalized M-estimator