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Indicadores Antecedentes Extraídos de Preços de Ativos em Corte Transversal

Gustavo Araujo () and José Vicente

No 361, Working Papers Series from Central Bank of Brazil, Research Department

Abstract: This article develops leading indicators based on the cross-section of stock returns. The underlying assumption is that any information about future states of nature must be reflected in current stock prices. Three indicators are proposed: the approach employed by Allen et al. (2012), an approach based on Kelly and Jiang (2013) and an adaptation of the risk measure of Foster and Hart (2009) for cross-sectional data. We also analyze the first principal component of these indicators. The results show that the leading indica- tors proposed have high correlation with economic activity and that in general they make better predictions than random walk and the average of previous observations

Date: 2014-08
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