The real-time macro content of corporate financial reports: A dynamic factor model approach

Ahmed M. Abdalla, Jose M. Carabias and Panos N. Patatoukas

Journal of Monetary Economics, 2021, vol. 118, issue C, 260-280

Abstract: We use a standard dynamic factor model to extract new factors based on the real-time flow of accounting data from the corporate financial reports. The extracted accounting factors exploit across-sector comovements in corporate value creation drivers and can be used together with other closely watched economic indicators. We show that our weekly updated accounting factors are incrementally relevant for nowcasting and forecasting major components of economic output in the BEA's National Income and Product Accounts. Overall, our paper pioneers a new approach to incorporating the continuous flow of accounting data within the context of dynamic factor models.

Keywords: Corporate financial reports; Nowcasting; Forecasting; Macro accounting (search for similar items in EconPapers)
JEL-codes: E01 E32 E60 M41 (search for similar items in EconPapers)
Date: 2021
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Citations: View citations in EconPapers (1)

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Persistent link: https://EconPapers.repec.org/RePEc:eee:moneco:v:118:y:2021:i:c:p:260-280

DOI: 10.1016/j.jmoneco.2021.01.006

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