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(20) The overvaluation of high RSI lottery stocks relative to non-lottery stocks is slightly greater in economic expansions (positive CFNAI) and when economic uncertainty is high (above average JLN index).
The CFNAI is estimated as the first principal component of its constituent time series.
There are several caveats within the background document, which states, "The CFNAI is a coincident indicator of economic expansions and contractions." It also notes, "Research studies by economists at Harvard University, Princeton University, and the Federal Reserve Bank of Chicago have shown that the CFNAI often provides early indications of business cycle turning points and changes in inflationary pressure."
The figures below plot the response of FRBC inflation expectations to a typically sized shock to energy prices and to the CFNAI. As with UM Survey expectations, the impacts are statistically significant, but economically small.
Asymmetric Effects of Aggregate Bid-Ask Spreads This table reports the ordinary least squares estimation results of forecasting one-quarter-ahead excess stock market returns: [MATHEMATICAL EXPRESSION NOT REPRODUCIBLE IN ASCII] where LRES_LD is the linearly detrended log aggregate relative effective bid-ask spread, CFNAI is the Chicago Fed National Activity Index.
Table 2 shows the contemporaneous correlations between several aspects of the transcripts and economic activity as measured by the three-month moving average of the CFNAI. The overall correlation between various features of the Committee discussions and activity is negative and significant: when growth is above trend, the discussions are shorter and contain fewer unique words.
(13) As with the MEI comparison, we equate the CFNAI's average over the reference period to a value of zero from the CFSBC Activity Index to facilitate the comparison.
The CFNAI is the weighted average of 85 indicators of economic activity and inflationary pressure used as a measure of real economic activities taken from the Federal Reserve Bank of Chicago.
For the expanded VAR, in which the 10-year Treasury yield and a commodity price index are added, the responses of employment, CFNAI, and the federal funds rate to a monetary policy shock are qualitatively similar.
To illustrate these patterns, figure 1 depicts the evolution of several economic indicators: (1) the monthly change in nonfarm employment, the National Association of Purchasing Managers (NAPM) Index, lightweight vehicle sales, retail sales (excluding auto sales), manufacturing industrial production, and the Chicago Fed National Activity index (CFNAI), which itself summarizes a variety of indicators.
In Table 1, regressions (3) and (4) extend Hamilton's model by adding the Chicago Fed National Activity Index (CFNAI), [z.sub.t]:
The Chicago Fed National Activity Index (CFNAI) edged downward in September, revealing that national economic activity was slowing, and remained below historical trends.
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