Forecasting through the Rear-View Mirror: Data Revisions and Bond Return Predictability - Federal Reserve Bank of New York

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Forecasting through the Rear-View Mirror: Data Revisions and Bond Return Predictability

November 2012 Number 581
Revised March 2014

JEL classification: G10, G12

Authors: Eric Ghysels, Casidhe Horan, and Emanuel Moench

Macroeconomic data are typically subject to future revisions and released with delay. Predictive return regressions using such data therefore potentially overstate the information set available to investors in real time. We document that data revisions account for a sizeable share of in-sample and out-of-sample predictive power for Treasury returns found in macroeconomic data. This is partly explained by the fact that information contained in revisions to prior months' releases is incorporated into bond prices. Survey forecasts available in real time contain information about future revised data that is orthogonal to the real-time data and also helps to predict bond returns.

Available only in PDF pdf

41 pages / 639 kb

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