Don’t Ruin the Surprise: Temporal Aggregation Bias in Structural Innovations

Date: Friday, Sept. 27
Time: 3:30–5 pm
Location: Room 217 Arts Building, 9 Campus Dr., Saskatoon

Free and open to the public

About this event

Don’t Ruin the Surprise: Temporal Aggregation Bias in Structural Innovations

By Dr. Stephen Snudden (PhD), Assistant Professor, Wilfrid Laurier University

Structural innovations estimated from temporally aggregated data (i.e., sums, averages) are shown to be biased and predictable. Selective sampling is shown to rectify this bias only under specific conditions. A statistical test for temporal aggregation bias is proposed, which reveals that over 70 percent of structural innovations can be predicted using lagged daily information. Applying this test, we find significant mistiming in the shocks to the global crude oil market and show that economic agents have already responded to the predictable component. This predictability and mistiming challenge the reliability of structural economic conclusions drawn from monthly or quarterly data.

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