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Working Paper
A New Tool for Robust Estimation and Identification of Unusual Data Points
Most consistent estimators are what Müller (2007) terms “highly fragile”: prone to total breakdown in the presence of a handful of unusual data points. This compromises inference. Robust estimation is a (seldom-used) solution, but commonly used methods have drawbacks. In this paper, building on methods that are relatively unknown in economics, we provide a new tool for robust estimates of mean and covariance, useful both for robust estimation and for detection of unusual data points. It is relatively fast and useful for large data sets. Our performance testing indicates that our baseline ...
Working Paper
FRED-MD: A Monthly Database for Macroeconomic Research
This paper describes a large, monthly frequency, macroeconomic database with the goal of establishing a convenient starting point for empirical analysis that requires "big data." The dataset mimics the coverage of those already used in the literature but has three appealing features. First, it is designed to be updated monthly using the FRED database. Second, it will be publicly accessible, facilitating comparison of related research and replication of empirical work. Third, it will relieve researchers from having to manage data changes and revisions. We show that factors extracted from our ...
Working Paper
Nowcasting Tail Risks to Economic Activity with Many Indicators
This paper focuses on tail risk nowcasts of economic activity, measured by GDP growth, with a potentially wide array of monthly and weekly information. We consider different models (Bayesian mixed frequency regressions with stochastic volatility, classical and Bayesian quantile regressions, quantile MIDAS regressions) and also different methods for data reduction (either the combination of forecasts from smaller models or forecasts from models that incorporate data reduction). The results show that classical and MIDAS quantile regressions perform very well in-sample but not out-of-sample, ...
Working Paper
Important Factors Determining Fintech Loan Default: Evidence from the LendingClub Consumer Platform
This study examines key default determinants of fintech loans, using loan-level data from the LendingClub consumer platform during 2007–2018. We identify a robust set of contractual loan characteristics, borrower characteristics, and macroeconomic variables that are important in determining default. We find an important role of alternative data in determining loan default, even after controlling for the obvious risk characteristics and the local economic factors. The results are robust to different empirical approaches. We also find that homeownership and occupation are important factors in ...
Working Paper
FRED-QD: A Quarterly Database for Macroeconomic Research
In this paper we present and describe a large quarterly frequency, macroeconomic database. The data provided are closely modeled to that used in Stock and Watson (2012a). As in our previous work on FRED-MD, our goal is simply to provide a publicly available source of macroeconomic “big data” that is updated in real time using the FRED database. We show that factors extracted from this data set exhibit similar behavior to those extracted from the original Stock and Watson data set. The dominant factors are shown to be insensitive to outliers, but outliers do affect the relative influence ...
Working Paper
Nowcasting Tail Risks to Economic Activity with Many Indicators
This paper focuses on nowcasts of tail risk to GDP growth, with a potentially wide array of monthly and weekly information. We consider different models (Bayesian mixed frequency regressions with stochastic volatility, classical and Bayesian quantile regressions, quantile MIDAS regressions) and also different methods for data reduction (either forecasts from models that incorporate data reduction or the combination of forecasts from smaller models). Our results show that, within some limits, more information helps the accuracy of nowcasts of tail risk to GDP growth. Accuracy typically ...
Working Paper
The perils of working with Big Data and a SMALL framework you can use to avoid them
The use of “Big Data” to explain fluctuations in the broader economy or guide the business decisions of a firm is now so commonplace that in some instances it has even begun to rival more traditional government statistics and business analytics. Big data sources can very often provide advantages when compared to these more traditional data sources, but with these advantages also comes the potential for pitfalls. We lay out a framework called SMALL that we have developed in order to help interested parties as they navigate the big data minefield. Based on a set of five questions, the SMALL ...
Working Paper
Nowcasting Tail Risks to Economic Activity with Many Indicators
This paper focuses on nowcasts of tail risk to GDP growth, with a potentially wide array of monthly and weekly information. We consider different models (Bayesian mixed frequency regressions with stochastic volatility, as well as classical and Bayesian quantile regressions) and also different methods for data reduction (either forecasts from models that incorporate data reduction or the combination of forecasts from smaller models). Our results show that, within some limits, more information helps the accuracy of nowcasts of tail risk to GDP growth. Accuracy typically improves as time moves ...
Working Paper
The perils of working with Big Data and a SMALL framework you can use to avoid them
The use of “Big Data” to explain fluctuations in the broader economy or guide the business decisions of a firm is now so commonplace that in some instances it has even begun to rival more traditional government statistics and business analytics. Big data sources can very often provide advantages when compared to these more traditional data sources, but with these advantages also comes the potential for pitfalls. We lay out a framework called SMALL that we have developed in order to help interested parties as they navigate the big data minefield. Based on a set of five questions, the SMALL ...