Forecasting US recessions: The role of sentiment

Charlotte Christiansen, Jonas Nygaard Eriksen and Stig Vinther Møller

Journal of Banking & Finance, 2014, vol. 49, issue C, 459-468

Abstract: We study the role of sentiment variables as predictors for US recessions. We combine sentiment variables with either classical recession predictors or common factors based on a large panel of macroeconomic and financial variables. Sentiment variables hold vast predictive power for US recessions in excess of both the classical recession predictors and the common factors. The strong importance of the sentiment variables is documented both in-sample and out-of-sample.

Keywords: Business cycles; Forecasting; Factor analysis; Probit model; Sentiment variables (search for similar items in EconPapers)
JEL-codes: C22 C25 E32 E37 G17 (search for similar items in EconPapers)
Date: 2014
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Citations: View citations in EconPapers (72)

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Related works:
Working Paper: Forecasting US Recessions: The Role of Sentiments (2013)
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Persistent link: https://EconPapers.repec.org/RePEc:eee:jbfina:v:49:y:2014:i:c:p:459-468

DOI: 10.1016/j.jbankfin.2014.06.017

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