Do Media Data Help to Predict German Industrial Production?

Konstantin Kholodilin (), Tobias Thomas and Dirk Ulbricht

No 1393, Discussion Papers of DIW Berlin from DIW Berlin, German Institute for Economic Research

Abstract: Expectations form the basis of economic decisions of market participants in an uncertain world. Sentiment indicators reflect those expectations and thus have a proven track record for predicting economic variables. However, respondents of surveys perceive the world to a large extent with the help of media. So far, mainly very crude media information, such as word-count indices, has been used in the prediction of macroeconomic and financial variables. In this paper, we employ a rich data set provided by Media Tenor International, based on the sentiment analysis of all relevant media information in Germany from 2001 to 2014, whose results are transformed into several monthly indices. German industrial production is predicted in a real-time out-of-sample forecasting experiment using more than 17,000 models formed of all possible combinations with a maximum of 3 out of 48 macroeconomic, survey, and media indicators. It is demonstrated that media data are indispensable when it comes to the prediction of German industrial production both for individual models and as a part of combined forecasts. They increase reliability by improving accuracy and reducing instability of the forecasts, particularly during the recent global financial crisis.

Keywords: Forecast combination; media data; German industrial production; reliability index; R-word (search for similar items in EconPapers)
JEL-codes: C10 C52 C53 E32 (search for similar items in EconPapers)
Pages: III, 26 p.
Date: 2014
New Economics Papers: this item is included in nep-eur, nep-for and nep-mac
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (5)

Downloads: (external link)
https://www.diw.de/documents/publikationen/73/diw_01.c.467749.de/dp1393.pdf (application/pdf)

Related works:
Journal Article: Do Media Data Help to Predict German Industrial Production? (2017)
Working Paper: Do media data help to predict German industrial production? (2014)
This item may be available elsewhere in EconPapers: Search for items with the same title.

Export reference: BibTeX RIS (EndNote, ProCite, RefMan) HTML/Text

Persistent link: https://EconPapers.repec.org/RePEc:diw:diwwpp:dp1393

Access Statistics for this paper

More papers in Discussion Papers of DIW Berlin from DIW Berlin, German Institute for Economic Research Contact information at EDIRC.
Bibliographic data for series maintained by Bibliothek ().