DP5271 Data Revisions Are Not Well-Behaved

Author(s): Boragan Aruoba

Publication Date: October 2005

Keyword(s): forecasting , news and noise , real-time data , NIPA variables

JEL(s): C22 , C53 , C82

Programme Areas: International Macroeconomics

Link to this Page: www.cepr.org/pubs/dps/DP5271.asp

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.