The real-time macro content of corporate financial reports: a dynamic factor model approach

Ahmed M. Abdalla, Jose M. Carabias, Panos N. Patatoukas

Research output: Contribution to journalArticleResearchpeer-review

Abstract

We use a standard dynamic factor model to extract new factors based on the real-time flow of accounting data from the corporate financial reports. The extracted accounting factors exploit across-sector comovements in corporate value creation drivers and can be used together with other closely watched economic indicators. We show that our weekly updated accounting factors are incrementally relevant for nowcasting and forecasting major components of economic output in the BEA's National Income and Product Accounts. Overall, our paper pioneers a new approach to incorporating the continuous flow of accounting data within the context of dynamic factor models.

Original languageEnglish
Pages (from-to)260-280
Number of pages21
JournalJournal of Monetary Economics
Volume118
DOIs
Publication statusPublished - Mar 2021

Keywords

  • Corporate financial reports
  • Forecasting
  • Macro accounting
  • Nowcasting

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