KIC000015 - Forecasting Econ Data We can't observe the data...

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Forecasting Econ Data We can't observe the data until its released. Each data item contains two pieces, and expected part and an unexpected part. Market should impound expectations prior to data release and then reacts to unexpected part. Since unexpected part is impossible to forecast by definition, why do we care? Does everyone have the same expectations? N'P"",."",w""",\:rs,,,,,,,,",,.,,l?nlJ-II1-lj!,,",' N"' ' ' ·' ' ' ,:jrqr' ,,''''.ri .... Expected Relationships Short-run vs long-run matters SRexpected inflation is near O. LR it's a major issue Economic expansion => inflation => FED policy to increase SR rates to reduce future inflation => reduces future growth Economic contraction => reduced inflation or deflation risk => FED policy to decrease SRrates to spur growth => lR rates increase as inflation expectations grow Any indicator that predicts economic growth will be correlated with yields, but term matters IT~ :W-\®sn ,:txDn~~ 5\~ ff:D _ 3 Kitchen Sink Approach
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KIC000015 - Forecasting Econ Data We can't observe the data...

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