The predictive power of the business and bank sentiment of firms: a high-dimensional Granger causality approach

DOI10.1016/J.EJOR.2016.03.041MaRDI QIDQ323299zbMATHOpenAlexFDO

Authors Ines Wilms, Sarah Gelper, Christophe Croux

Publication date 7 October 2016

Published in European Journal of Operational Research (Search for Journal in Brave)

Full work available at URL https://arxiv.org/abs/1508.02846

zbMATH Keywords

bootstrapLassotime series forecastingGranger causalitysentiment surveys

Mathematics Subject Classification ID

Applications of statistics to economics (62P20) Inference from stochastic processes and prediction (62M20)

Abstract: We study the predictive power of industry-specific economic sentiment indicators for future macro-economic developments. In addition to the sentiment of firms towards their own business situation, we study their sentiment with respect to the banking sector - their main credit providers. The use of industry-specific sentiment indicators results in a high-dimensional forecasting problem. To identify the most predictive industries, we present a bootstrap Granger Causality test based on the Adaptive Lasso. This test is more powerful than the standard Wald test in such high-dimensional settings. Forecast accuracy is improved by using only the most predictive industries rather than all industries.

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Cited in

(2)

• Confidence intervals for parameters in high-dimensional sparse vector autoregression
• Sparse regression for large data sets with outliers

Describes a project that uses

Uses Software

• ElemStatLearn

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