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

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

LSE Research Online Documents on Economics from London School of Economics and Political Science, LSE Library

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: F3 G3 M40 (search for similar items in EconPapers)
Pages: 21 pages
Date: 2021-03-01
New Economics Papers: this item is included in nep-acc and nep-fdg
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (1)

Published in Journal of Monetary Economics, 1, March, 2021, 118, pp. 260-280. ISSN: 0304-3932

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Persistent link: https://EconPapers.repec.org/RePEc:ehl:lserod:108539

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