Improved recession dating using stock market volatility

Yu-Fan Huang and Richard Startz

International Journal of Forecasting, 2020, vol. 36, issue 2, 507-514

Abstract: We offer an improved dating of U.S. business cycle turning points both retrospectively and in real time. This improvement is made possible by augmenting existing Markov-switching dynamic factor models with additional information on the stock return volatility. The model improves the prediction of the state of the economy using fully revised data significantly. Real-time identification can be made noticeably earlier than the NBER announcements, beating both the peak and trough announcements for recent recessions by several months.

Keywords: Business cycle; Turning point; Stock return volatility; Real time; Recessions (search for similar items in EconPapers)
Date: 2020
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Citations: View citations in EconPapers (3)

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Persistent link: https://EconPapers.repec.org/RePEc:eee:intfor:v:36:y:2020:i:2:p:507-514

DOI: 10.1016/j.ijforecast.2019.07.004

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