What Can Revisions to the NFCI Tell Us About Stock Market Volatility?

Abstract: In this blog post, we document that recent revisions to the Chicago Fed’s National Financial Conditions Index (NFCI) have been large and clustered in time—a pattern not seen since the 2007–09 global financial crisis. As financial conditions tightened early on during the Covid-19 outbreak here in the U.S., there were large positive revisions to the NFCI through much of March. We show that revisions of this magnitude and in this direction have often preceded substantial increases in stock market volatility. More recently, in late March and April, the large negative revisions to the NFCI suggest that financial conditions are improving faster than expected by the historical relationships underpinning the index.

Keywords: National Financial Conditions Index (NFCI); Covid-19; stock market;

Access Documents


Bibliographic Information

Provider: Federal Reserve Bank of Chicago

Source: Federal Reserve Bank of Chicago

Publication Date: 2020-05-04