Graduation Year
2015
Date of Submission
4-2015
Document Type
Campus Only Senior Thesis
Degree Name
Bachelor of Arts
Department
Economics
Reader 1
Manfred Werner Keil
Terms of Use & License Information
Rights Information
© 2015 Vicky (Mengyue) Yang
Abstract
Using data from the Michigan Consumer Survey, I explore alternatives for constructing the Index of Consumer Sentiment (ICS) to improve its forecasting power regarding consumption and its components. Questions which seemed to matter in the past are no longer good predictors. For more recent sample periods, expectations of automobile purchases, unemployment, and current economic situations are more important than categories selected previously. An alternative index is constructed accordingly. Applying different techniques suggested in the literature, the new index significantly outperforms the ICS in both in-sample and out-of-sample tests. Furthermore, the new index also produces more accurate results when forecasting recessions.
Recommended Citation
Yang, Vicky (Mengyue), "The Forecasting Power of the Index of Consumer Sentiment: How Robust is It to Alternative Specifications?" (2015). CMC Senior Theses. 1180.
https://scholarship.claremont.edu/cmc_theses/1180
This thesis is restricted to the Claremont Colleges current faculty, students, and staff.
