arXiv 4 Jun 2025 · Econometrics · publishedInternational Review of Economics & Finance (2026)
arXiv:2506.04488 · PDF · DOI · OpenAlex · Extracted main text
This paper introduces a new least squares regression methodology called (C)LARX: a (constrained) latent variable autoregressive model with exogenous inputs. Two additional contributions are made as a side effect: First, a new matrix operator is introduced for matrices and vectors with blocks along one dimension; Second, a new latent variable regression (LVR) framework is proposed for economics and finance. The empirical section examines how well the stock market predicts real economic activity in the United States. (C)LARX models outperform the baseline OLS specification in out-of-sample forecasts and offer novel analytical insights about the underlying functional relationship.
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The works this paper leans on most, across its whole bibliography — not restricted to papers in our corpus. Ranked by composite intensity, which combines how often a work is mentioned, how many sections mention it, and how much of that falls in the main text rather than the appendix.
| Reference | Intensity | Mentions | Sections | Main text | |
|---|---|---|---|---|---|
| 1 | Eugene F. Fama and Kenneth R. French (1993) Common risk factors in the returns on stocks and bonds | 1.000 | 6 | 3 | 100% |
| 2 | James H Stock and Mark W Watson (2002) Macroeconomic forecasting using diffusion indexes | 0.874 | 7 | 2 | 100% |
| 3 | Jushan Bai and Serena Ng (2006) Evaluating latent and observed factors in macroeconomics and finance | 0.811 | 4 | 2 | 100% |
| 4 | Seung C. Ahn, Stephan Dieckmann, and M. Fabricio Perez (2017) Is there a missing factor? a canonical correlation approach to factor models | 0.737 | 3 | 2 | 100% |
| 5 | Clifford S. Asness, Tobias J. Moskowitz, and Lasse Heje Pedersen (2013) Value and momentum everywhere | 0.737 | 3 | 2 | 100% |
| 6 | Alison J. Burnham, Roman Viveros, and John F. MacGregor (1996) Frameworks for latent variable multivariate regression | 0.737 | 3 | 2 | 100% |
| 7 | Yining Dong and S. Joe Qin (2017) Dynamic latent variable analytics for process operations and control | 0.737 | 3 | 2 | 100% |
| 8 | Christopher Ball and Jack French (2021) Exploring what stock markets tell us about gdp in theory and practice | 0.644 | 4 | 1 | 100% |
| 9 | Arthur F Burns and Wesley C Mitchell (1946) Measuring business cycles | 0.644 | 2 | 2 | 100% |
| 10 | H. Hotelling (1933) Analysis of a complex of statistical variables into principal components | 0.644 | 2 | 2 | 100% |
Showing the top 10 of 60 scored citations.