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ACC JOURNAL 2016, Volume 22, Issue 2 DOI: 10.15240/ ul/004/2016-2-001
THE USE OF ECONOMIC INDICATORS AS A TOOL FOR PREDICTING
S&P 500 STOCK INDEX
Jan Do olil
Technical Uni e si y o Libe ec, Facul y o Economics, Depa men o Economics,
Vo oněžská 13, 460 01 Libe ec 1, Czech Republic
e-mail: [email p o ec ed]
Abs ac
Wo ld o ganiza ions and businesses a e s uggling o bes p edic u u e economic
de elopmen s. Fo example, he O ganisa ion o Economic Co-ope a ion and De elopmen
(OECD) cons uc ed he Composi e Leading Indica o s (CLI) and he Con e ence Boa d
o ganiza ion (CB) c ea ed he Leading Economic Index (LEI) as a ool o p edic ion o he
economy. This a icle aims o analyze he p edic i e abili y o indi idual economic indica o s,
bu no wi h espec o economic de elopmen , bu in ela ion o he de elopmen o he
S&P 500 s ock index. The esul o he analysis o he indica o s’ p edic i e abili y, i.e.
leading, coinciden and possible lagging o he indica o due o he de elopmen o he
S&P 500 s ock index, is subsequen ly possible o use, o example, in he cons uc ion o a
company’s in es men s a egy, whe e he leading indica o se es as an indica o o he
u u e de elopmen o he S&P 500 s ock index.
Keywo ds
S&P 500 s ock index; Economic indica o s; Economic de elopmen ; P edic ion.
In oduc ion
P edic ion o ecession, swings and e e sals in economic de elopmen has been such a s ong
mo i e o go e nmen s and manage s ha since abou he 30’s o he 20 h cen u y,
inc easingly appa en a emp s o secu e ins i u iona y o ecas ing ools o ensu e egula and
comp ehensi e in o ma ion abou he economic ou look in he upcoming mon hs can be seen
in many Wes e n coun ies. Wi h he de elopmen o he app op ia e ools o p edic ion, he
o ecas ing me hodology ha seeks o syn hesize he ac o s ha accompany changes in
economic de elopmen was also de eloped. [8]
One esul o me hodological expe imen a ion is he cons uc ion o leading economic indexes
ha would b ing oge he he pa ial economic indica o s, which ha e epea edly shown ha
hei cu en beha io is closely co ela ed wi h changes in he u u e and epo ha economic
de elopmen will change. [8] This s udy also desc ibes he need o uni o m s a is ical
p ocessing and seasonally adjus ed da a. Bo h he OECD and CB cu en ly use all he abo e
p inciples. Comincioli [2] and Ums ead [13] show a posi i e co ela ion be ween he S&P 500
s ock index and economic de elopmen . In hese s udies, a posi i e co ela ion be ween he
S&P 500 s ock index and economic de elopmen is demons a ed; hus he S&P 500 can be
ma ked as a leading indica o . Kubis and Cica elli [9] sugges ha he S&P 500 s ock index
eaches a e age esul s as a ool o iden i ying he peaks and oughs o he economic cycle.
The S&P 500 s ock index p edic ed peaks o he economic cycle wi h a 30% p obabili y and
oughs wi h 40% p obabili y. The low p edic i e abili y o peaks o oughs in his a icle,
howe e , can be in luenced by he S&P 500 s ock index da a ans o ma ion.
8
Today, he leading indexes a e a beyond a me e expe imen and hey al eady moni o and
p edic he e olu ion o he economic cycle and demons a e possible u u e isks in he
economy. Czesaný and Jeřábko á [3], Gyomai and Guide i [5] demons a ed he e ec i e use
o leading indica o s as economic indica o s. He e, he economic indica o o Money Supply
showed excellen p edic i e capabili ies, p edic ing a peak o economic de elopmen o he
economy wi h 75% p obabili y and oughs wi h 63% p obabili y. Apa om he abili y o
p edic economic de elopmen , wi h he expansion o capi al ma ke s, he e is an e o o
p edic he u u e de elopmen o s ock indexes using leading indica o s. Do olil [4] and
Lege [10] compa e he CLI wi h he S&P 500 s ock index. The a icles show a posi i e
co ela ion be ween he CLI and S & P 500. Wi hin he a icle, howe e , CLI does no achie e
he highes deg ee o co ela ion in ad ance, bu wi h a delay. Based on hese obse a ions he
composi e CLI index can be ma ked as a lagging indica o due o he de elopmen o he
S&P 500.
1 Aims o he A icle
The a icle aims o analyze he p edic i e abili y o indi idual economic indica o s, bu no
wi h espec o economic de elopmen , bu in ela ion o he de elopmen o he S&P 500
s ock index. The esul o he analysis o he indica o s’ p edic i e abili y, hus ad ance,
o e lapping, and possible delays o he indica o due o he de elopmen o he S&P 500
s ock index, can subsequen ly be applied, o example, in he cons uc ion o company’s
in es men s a egy, whe e he leading indica o se es as an indica o o he u u e
de elopmen o he S&P 500.
The aim o his pape is o analyze he p edic i e powe o economic indica o s in ela ion o
he de elopmen o he S&P 500 s ock index.
2 Me hodology and Me hods
The p edic i e capabili ies o indi idual economic indica o s in ela ion o he de elopmen o
he S&P 500 s ock index a e analyzed on he basis o his o ical da a o he pe iod om
Janua y 2007 o Sep embe 2014. Time se ies o leading indica o s and S&P 500 s ock index
a e smoo hed and cleaned using he Hod ick-P esco (HP) il e .
The Hod ick-P esco il e is one o he bes known and mos widely used de- ending
me hods. The il e was i s desc ibed by Hod ick and P esco [6]. Nowadays i is also used
in he cons uc ion o he OECD CLI. In i s o iginal o m he end es ima e is he esul o
op imiza ion p oblem (1), (2).
cy 

(1)
2
11
2)2()(min   
y

(2)
whe e
y – ini ial se ies,
τ – ends,
c – cyclical componen ,
λ – HP il e pa ame e .
The ini ial y se ies is decomposed in o τ , he end componen , and c , he cyclical
componen , wi h he objec i e being o minimize he dis ance be ween he end and he
9
o iginal se ies and, a he same ime, o minimize he cu a u e o he end se ies. The ade-
o be ween he wo goals is go e ned by he λ pa ame e .
Subsequen ly, he leading indica o s a e co ela ed wi h he de elopmen o he S&P 500
s ock index using Spea man’s co ela ion coe icien .
To e alua e he possibili y o p edic ion o economic indica o s, he co ela ion o ime se ies
and a subsequen analysis o he leade s, o e lapping o delay is used in he ime se ies o he
economic indica o . Spea man’s co ela ion coe icien is used o co ela e he ime se ies.
Spea man’s co ela ion coe icien is a non-pa ame ic me hod ha uses he calcula ion o he
o de o alues o moni o ed a iables. This me hod can be used o desc ibe any dependency,
ei he linea o nonlinea . Spea man’s co ela ion coe icien can be used o measu e he
s eng h o he ela ionship among hese a iables, whe e i canno be expec ed o assume
linea i y o he ela ionship o no mal dis ibu ion o he a iables x and y. Dependence
a iables can ha e bo h upwa d and downwa d cha ac e .
The calcula ion o Spea man’s co ela ion coe icien ( s) is based on he o de (i) and he
co ela ion couples (ix, iy) a e gi en by ela ion (3).





n
iyxs ii
nn
1
2
2)(
)1(
6
1
(3)
whe e
s – Spea man’s co ela ion coe icien indica ing he in ensi y o he ela ionship be ween he
wo moni o ed a iables,
ix – he alue o he ime se ies x in ime i,
iy – he alue o he ime se ies y in ime i,
n – numbe o co ela ion couples.
Me hods o scien i ic wo k, pa icula ly analysis, syn hesis, compa ison, deduc ion, induc ion,
abduc ion, desc ip ion and applica ion o ma hema ical and s a is ical me hods a e used in he
pape .
3 Resea ch
This pape analyses he pa ial economic indica o s wi h he de elopmen o he S & P 500
s ock index o iden i y leading, coinciden and lagging economic indica o s. The S anda d &
Poo ’s 500 (S&P 500) is an Ame ican s ock ma ke index based on he ma ke capi aliza ions
o 500 la ge companies. [12] De elopmen o he S&P 500 s ock index is shown in Fig. 1.
3.1 Economic Indica o s
Economic indica o s can be g ouped acco ding o he iming o he u ning poin in he ime
se ies in ela ion o he e e ence se ies, which po ays he ac ual incidence o u ning poin .
E.g. Kadeřábko á and Žďá ek [7] di ide hem in o h ee g oups:
 Leading indica o s a e among he mos obse ed, and allow p edic ing u ning poin s in
he economy wi h some ime in ad ance be o e hei ac ual implemen a ion.
 Coinciden indica o s ha e been de eloped in pa allel wi h he de elopmen o e e ence
business cycle se ies including u ning poin s (GDP can be included among he coinciden
indica o s).
 Lagging indica o s wi h a ime lag eplica e he e e ence se ies o economic
de elopmen .
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Subsequen ly, he indica o s a e di ided in e ms o he cycle o:
 Cyclical indica o s – hei in o ma ional alue inc eases wi h inc easing economic
ac i i y and ice e sa.
 Coun e -cyclical indica o s declining wi h he g ow h o economic ac i i y and ice
e sa.
 Acyclic indica o s do no ma ch he cycle de elopmen .
Sou ce: Own om Yahoo[14]
Fig. 1: S&P 500 s ock index
3.2 Composi e Indica o s
O ganiza ions dealing wi h he p edic ions o economic de elopmen combine selec ed
indica o s di ided in o g oups acco ding o hei iming in he o m o agg ega es, e.g.
indexes. The eason o he o ma ion o agg ega es a he han obse ing ime se ies o one
indica o is he ac ha he ac o s ha in luence he cou se o a ime se ies may no be
decisi e o he cycle [11]. Using a la ge numbe o indica o s allows o smoo hing pa o
ola ili y o he componen s o he index.
3.2.1 Con e ence Boa d
In he US, he Con e ence Boa d (CB) compiles and publishes a mon hly composi e index
(LCI). Composi e indexes a e cons uc ed by h ee g oups o indica o s di e en ia ed
acco ding o iming o u ning poin s in hei ime se ies. Leading Economic Index (LEI),
Coinciden Economic Index (CEI) and Lagging Economic Index (LAG) a e cons uc ed om
ou o en indica o s, some o which a e published by s a e ins i u ions (e.g. he cen al bank,
he s a is ical o ices), o he s a e cons uc ed and published by specialized agencies [1].
3.2.2 OECD
The OECD composi e sys em o indica o s (CLI) was c ea ed in he 70s o he 20 h cen u y
and was designed o p edic u ning poin s in economic de elopmen . CLI and pa ial leading
indica o s a e based on da a a ailable wi hin he coun ies in ol ed in he index and a e used
o sho - e m o ecas s o changes in he di ec ion o he economy (6 o 12 mon hs). Fo each
coun y, sligh ly di e en ime se ies o leading indica o s and ypes o leading indica o s in
he index a e chosen [5].
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Wi hin his pape , pa ial economic indica o s o Uni ed S a es which ha e o ha e no been
inco po a ed in o he composi e leading index CLI o LEI a e selec ed and subsequen ly
analyzed:
 New esiden ial sale
 New Residen ial Cons uc ion
 Re ail T ade and Food Se ices, ex Au o
 Sales o Au o and O he Mo o Vehicles
 Manu ac u ing In en o ies
 Du able Goods O de s
 Pu chasing Manage s Index, PMI
 Unemploymen Ra e – Manu ac u ing
 Labo – A e age weekly hou s
 In la ion
 Money supply M2
 Mo gage ix a e – 30 yea s
 In e es a e sp ead, 10-yea T easu y bonds less ede al unds
3.3 Economic Indica o s Co ela ed wi h he S&P 500 S ock Index
The p edic i e capabili ies o indi idual economic indica o s in ela ion o he de elopmen o
he S&P 500 s ock index a e analyzed on he basis o his o ical da a o he pe iod om
Janua y 2007 o Sep embe 2014. The indica o s e e ence se ies a e analyzed due o da e o
publishing he indica o da a. The da e o he disclosu e o indica o da a is a ound 1 – 1.5
mon hs la e in ela ion o he ime pe iod. Fo example da a o Janua y a e being published
in la e Feb ua y o in mid-Ma ch. Time se ies a e co ela ed when he indica o alue is
published.
Tab. 1: Economic indica o o Uni ed S a es co ela ed wi h he S&P 500 s ock index
Economic indica o o Uni ed S a es
co ela ed wi h he S&P 500 s ock index
The highes Spea man’s co ela ion
coe icien
Value
Time
(Leading/Coinciden /Lagging
Indica o )
New Residen ial Sale
0.692
Lagging - 10 mon hs
New Residen ial Cons uc ion
0.860
Lagging - 5 mon hs
Re ail T ade and Food Se ices, ex Au o
0.778
Leading - 1 mon h
Sales o Au o and O he Mo o Vehicles
0.991
Coinciden - 0 mon h
Manu ac u ing In en o ies
0.776
Lagging - 5 mon hs
Du able Goods O de s
0.965
Lagging - 5 mon hs
Pu chasing Manage s Index, PMI
0.860
Lagging - 1 mon h
Unemploymen Ra e – Manu ac u ing
–0.940
Lagging - 7 mon hs
Labo – A e age weekly hou s
0.831
Lagging - 4 mon hs
In la ion
–0.948
Leading - 21 mon hs
Money supply M2
0.998
Lagging - 1 mon h
Mo gage ix a e – 30 yea s
–0.980
Leading - 24 mon hs
In e es a e sp ead, 10-yea T easu y bonds
less ede al unds
–0.587
Lagging - 6 mon hs
Sou ce: Own

12
Economic indica o s da a co ela ed wi h he S&P 500 s ock index da a is shi ed o each
e e ence se ies. The aim o compu a ion is o ind he highes Spea man’s co ela ion
coe icien . The highes Spea man’s co ela ion coe icien indica es he closes dependence
be ween e e ence se ies o economic indica o and S&P 500 s ock index. Based on he
highes Spea man’s co ela ion coe icien i is possible o iden i y he p edic i e abili y o
indi idual economic indica o s. The de ail o each indi idual economic indica o , he alue o
he highes Spea man’s co ela ion coe icien and he p edic i e abili y can be seen in Tab. 1.
All analyzed economic indica o s a e cyclical wi h espec o he S&P 500 s ock index, excep
o In la ion, he Unemploymen Ra e – Manu ac u ing, Mo gage ix a e – 30 yea s, and
In e es a e sp ead, which a e coun e -cyclical.
In la ion and Mo gage ix a e – 30 yea s a e each he highes in e se co ela ion
coe icien wi h 21 and 24 mon hs o ad ance no ice. Howe e , his is a e y long in e al
wi hin he epo ing pe iod, and he e o e; he da a may be biased due o he ime se ies
sho ening. Fo his eason, he ela ionship be ween he in la ion and he S&P 500 needs o
be es ed o longe pe iods o ime. The economic indica o Re ail T ade and Food Se ices,
ex Au o is ano he indica o which indica es p edic i e abili y o he indica o . The imeline o
he p edic ion abili y o his indica o is 1 mon h. Spea man’s co ela ion coe icien ob ains
he 0.778 alue. The alue o Spea man’s co ela ion coe icien indica es a close ela ionship
be ween e e ence se ies o he S&P 500 s ock index and he economic indica o Re ail T ade
and Food Se ices, ex Au o. Coinciden indica o was only one – Sales o Au o and O he
Mo o Vehicles. The alue o Spea man’s co ela ion coe icien 0.991 indica es a deep
ela ionship among e e ence se ies.
Conclusion
F om he co ela ion analysis o economic indica o s, ou sub-economic indica o s showed
he highes alue o he Spea man co ela ion coe icien in ad ance. Howe e h ee o hem
ha e a e y long in e al. The economic indica o Re ail T ade and Food Se ices, ex Au o
peaked Spea man’s co ela ion coe icien 0.778 one mon h in ad ance. O he economic
indica o s showed he highes deg ee o igh ness wi h a iously long delays in ela ion o he
S&P 500. This ac is also due o he delay in da a publica ion o pa ial indica o s. On
a e age, he delay in he disclosu e o da a indica o is a ound 1 – 1.5 mon hs. Da a o
Janua y a e being published in la e Feb ua y o in mid-Ma ch. The highes deg ee o
dependence wi h he de elopmen o he S&P 500 s ock index is epo ed o he e ail sales
economic indica o o he Money supply M2 (Spea man’s co ela ion coe icien 0.998).
The esul o he analysis o he indica o s’ p edic i e abili y, i.e. leading, coinciden , and
possible lagging o he indica o due o he de elopmen o he S&P 500 s ock index, is
subsequen ly possible o use, o example, in he cons uc ion o a company’s in es men
s a egy, whe e he leading indica o se es as an indica o o he u u e de elopmen o he
S&P 500 s ock index. The esul s o co ela ion analysis con i m he s a emen s ha he ac ual
S&P 500 s ock index is a leading indica o , see Comincioli [2] and Ums ead [13].
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Mg . Jan Do olil
14
VYUŽITÍ EKONOMICKÝCH INDIKÁTORŮ JAKO NÁSTROJ PREDIKCE VÝVOJE
AKCIOVÉHO INDEXU S&P 500
S ě o é o ganizace a podniky se snaží co nejlépe p ediko a budoucí ý oj ekonomiky.
O ganizace p o hospodářskou spolup áci a oz oj (OECD) zkons uo ala sys ém Composi e
Leading Indica o s (CLI) a o ganizace Con e ence Boa d (CB) y ořila Leading Economic
Index (LEI) jako nás oj p edikce ý oje ekonomiky. Příspě ek si klade za cíl analyzo a
p edikční schopnos i dílčích ekonomických indiká o ů – nikoli šak zhledem k ý oji
ekonomiky, ale zhledem k ý oji akcio ého indexu S&P 500. Výsledek analýzy p edikčních
schopnos í indiká o ů, edy předs ih, souběh a případné zpoždění indiká o u zhledem k
ý oji akcio ého indexu S&P 500, je následně možné yuží například při kons ukci
in es iční s a egie podniku, kde předs iho ý ukaza el slouží jako indiká o budoucího ý oje
akcio ého indexu S&P 500.
DIE VERWENDUNG VON WIRTSCHAFTSINDIKATOREN ALS INSTRUMENT
ZUR VORHERSAGE DER ENTWICKLUNG DES AKTIENINDEX S&P 500
Die Wel o ganisa ionen und -un e nehmen bemühen sich, die zukün ige En wicklung de
Wi scha bes ens o he zusagen. Die O ganisa ion ü wi scha liche Zusammena bei und
En wicklung (OECD) ha das Sys em Composi e Leading Indica o s (CLI) kons uie , und
die O ganisa ion Con e ence Boa d (CB) ha den Leading Economic Index (LEI) als
Ins umen zum Vo he sagen de En wicklung de Wi scha en wo en. Das Ziel des
Bei ags bes eh in de Analyse de p ädik i en Fähigkei en de einzelnen ökonomischen
Indika o en, jedoch nich in Bezug au die En wicklung de Ökonomik, sonde n in Bezug au
die En wicklung des Ak ienindexes S&P 500. Das E gebnis de Analyse de p ädik i en
Fähigkei en de Indika o en, also den Vo sp ung, den Gleichlau und die e en uelle
Ve zöge ung eines Indika o en gegenübe de En wicklung des Ak ienindexes S&P 500, kann
man nach olgend zum Beispiel beim Kons uie en de In es i ionss a egie eines
Un e nehmens e we en, wobei de Indika o des Vo sp ungs als Indika o de zukün igen
En wicklung des Ak ienindexes S&P 500 dien .
WYKORZYSTANIE WSKAŹNIKÓW EKOOMICZNYCH JAKO NARZĘDZIA
DO PROGNOZOWANIA ROZWOJU INDEKSU GIEŁDOWEGO S&P 500
O ganizacje świa owe i p zedsiębio s wa s a ają się jak najlepiej p zewidzieć ozwój
gospoda ki w p zyszłości. O ganizacja Współp acy Gospoda czej i Rozwoju (OECD)
s wo zyła sys em Composi e Leading Indica o s (CLI) a o ganizacja Con e ence Boa d (CB)
op acowała Leading Economic Index (LEI) jako na zędzie do p ognozowania ozwoju
gospoda czego. Celem a ykułu jes p zep owadzenie analizy zdolności p ognos ycznej
poszczególnych wskaźników ekonomicznych, jednak nie w odniesieniu do ozwoju
gospoda ki, ale w s osunku do ksz ał owania się indeksu giełdowego S&P 500. Wyniki
analizy zdolności p ognos ycznej wskaźników, a za em wyp zedzenie, zbieżność i ewen ualne
opóźnienie wskaźnika wobec ozwoju indeksu giełdowego S&P 500, można później
wyko zys ać p zykładowo w amach budowania s a egii inwes ycyjnej i my, gdzie wskaźnik
wyp zedzający służy jako wskaźnik p zyszłego ozwoju indeksu giełdowego S&P 500.