Should macroeconomic forecasters use daily financial data and how?

Abstract

We introduce easy to implement regression-based methods for predicting quarterly real economic activity that use daily financial data and rely on forecast combinations of MIDAS regressions. Our analysis is designed to elucidate the value of daily information and provide real-time forecast updates of the current (nowcasting) and future quarters. Our findings show that while on average the predictive ability of all models worsens substantially following the financial crisis, the models we propose suffer relatively less losses than the traditional ones. Moreover, these predictive gains are primarily driven by the classes of government securities, equities, and especially corporate risk.MIDAS, macro forecasting, leads, daily financial information, daily factors.