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Does Macro Variables help in predicting Market Retrun?

Posted: August 26th, 2019, 7:56 pm
by goodtoknow
Which all macro variables can be use to predict the market direction - IMF, World Bank...

Re: Does Macro Variables help in predicting Market Retrun?

Posted: August 26th, 2019, 10:48 pm
by bearish
Yes

Re: Does Macro Variables help in predicting Market Retrun?

Posted: August 27th, 2019, 3:13 am
by goodtoknow
Could you please share the reference paper/blog?

Re: Does Macro Variables help in predicting Market Retrun?

Posted: August 31st, 2019, 4:17 pm
by gardener3
No

Re: Does Macro Variables help in predicting Market Retrun?

Posted: September 1st, 2019, 7:10 pm
by varunkyadav
There is something called as Oxford Economic Model. This is model and a tool that is used by the portfolio team (in a firm where I worked previously) to convert Macro Economic Variable forecasts into Capital Market Variable shocks. You could probably look at the parameters they use and would be the same to forecast market directions
https://www.oxfordeconomics.com/Media/Default/Thought%20Leadership/free-files/oe_user_guide.pdf

further more you can google "CCAR 9 quarter projections" these are variables NY FED uses to forecast US Capital Markets.

Re: Does Macro Variables help in predicting Market Retrun?

Posted: September 2nd, 2019, 12:49 pm
by DavidJN
The financial sector is typically simplistically represented in DSGE (distributed stochastic general equilibrium) macroeconomic models, sometimes as simple as plug variables that assumes perfect competition and deny the possibility of a financially induced recession. Macroeconomics as   a discipline has a decidedly poor forecasting track record, Noah Smith, who among other things writes for Bloomberg, has a good deck on the weak state of macroeconomics and forecasting. Yet the regulators and central banks, who themselves are miles away from usefully connecting the real and financial economies, are imposing this on the stress testing regime.  Just have a look at how low the R-squareds are in the CCAR world, a solid econometrician would laugh at it. Good luck. 

Re: Does Macro Variables help in predicting Market Retrun?

Posted: September 29th, 2019, 10:22 am
by gilgamesh
Macro economics has broadly failed to forecast very much, and we are currently in a negative rates environment that has an insufficient training set.   https://on.ft.com/34gOLcP  https://www.economist.com/finance-and-economics/2016/01/09/a-mean-feat
FT 'an astonishing record of completer failure'
when Loungani extends the deadline for forecasting a recession to September 2008, the consensus remained that not a single economy would fall into recession in 2009. Making up for lost time and satisfying the premise of an old joke, by September of 2009, the year in which the recessions actually occurred, the consensus predicted 54 out of 49 of them – that is, five more than there were. And, as an encore, there were 15 recessions in 2012. None were foreseen in the spring of 2011 and only two were predicted by September 2011.