Sir David Hendry: An Appreciation from Wall Street and What Macroeconomics Got Right

John Guerard ()

No 2024-001, Working Papers from The George Washington University, Department of Economics, H. O. Stekler Research Program on Forecasting

Abstract: Sir Davis Hendry is soon celebrating his 80th birthday! Why should Wall Street researchers care about Sir David Hendry? What should be a role for macroeconomic forecasting on portfolio selection? What do the forecasting works and software of Professor Hendry offer Wall Street that its researchers have yet to exploit? This author offers a unique perspective on the outstanding software, Autometrics, of Professor Hendry and his colleagues. The application of saturation variables in a changing world to address structural breaks in financial data. Financial economists since the time of Harry Markowitz, William (Bill) Sharpe, Martin Gruber and Ed Elton, Burton Malkiel, and Haim Levy, have modeled corporate earnings and stock process to create diversified portfolios that may incorporate financial anomalies. Wall Street researchers seek with great effort to beat the stock market. The author believes that the empirical research of Geoffrey Moore, Victor Zarnowitz, and David Hendry should be integrated into portfolio selection. Empirical evidence is reported that the Leading Economic Indicators (LEI), enhanced by Geoffrey Moore and Victor Zarnowitz, have led real US GDP, 1993-2023. A rising US GDP and stock market have been accompanied by outstanding corporate earnings, corporate earnings per share forecasts, and active portfolio returns, 1995 -2023. Professor Hendry’s software, Autometrics, could be a great resource of enormous value to portfolio construction and management as a tool for portfolio lambda setting.

Keywords: forecasting; saturation variables; structural breaks (search for similar items in EconPapers)
JEL-codes: C (search for similar items in EconPapers)
Pages: 30 pages
Date: 2024-01, Revised 2024-02
New Economics Papers: this item is included in nep-his and nep-hpe
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