DP5271 Data Revisions Are Not Well-Behaved

Author(s): Boragan Aruoba
Publication Date: October 2005
Keyword(s): forecasting, news and noise, NIPA variables, real-time data
JEL(s): C22, C53, C82
Programme Areas: International Macroeconomics
Link to this Page: cepr.org/active/publications/discussion_papers/dp.php?dpno=5271

We document the empirical properties of revisions to major macroeconomic variables in the United States. Our findings suggest that they do not satisfy simple desirable statistical properties. In particular, we find that these revisions do not have a zero mean, which indicates that the initial announcements by statistical agencies are biased. We also find that the revisions are quite large compared to the original variables and they are predictable using the information set at the time of the initial announcement, which means that the initial announcements of statistical agencies are not rational forecasts. We also provide evidence that professional forecasters ignore this predictability.