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

I. Wilms, S.E.C. Gelper, C. Croux

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6 Citaten (Scopus)
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Samenvatting

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.
Originele taal-2Engels
Pagina's (van-tot)138–147
TijdschriftEuropean Journal of Operational Research
Volume254
Nummer van het tijdschrift1
DOI's
StatusGepubliceerd - 2016

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