Jun 11, 2013

Leading indicators

We document that aggregate accounting earnings growth is a significant leading indicator of growth in Gross Domestic Product (GDP) up to four quarters ahead. Professional macro forecasters, however, do not fully incorporate the predictive content embedded in publicly available accounting earnings data. As a result, future GDP growth forecast errors are predictable based on accounting earnings data that are available to professional macro forecasters in real time.
That is from a new paper by Konchitchki & Patatoukas (June 2013). The title is "Accounting Earnings and Gross Domestic Product."

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