Interpreting
Movements in the
Composite Index of
Leading Indicators
Use Them With Caution
By H.O. Stekler
H.O. Stekler has been a
Research Professor at George
Washington University since
1994. Previously he had
taught at the University of
California, Berkeley; the State
University of New York, Stony
Brook; and at the National
Defense University. He has also
worked at the Board of Governors of the Federal Reserve System and the
President’s Council on Wage and Price Stability. He has
written extensively on issues involving forecasting and is
a director and fellow of the International Institute of
Forecasters as well as an associate editor of the
International Journal of Forecasting.
Evaluations of the forecasting performance of the
Composite Index of Leading Indicators (CLI) at cyclical
turning points have generally been made well after the
event, using historical data. This note questions whether
all historical versions of the index yield similar results
and whether the performance of the index in real-time,
using then-available data, is similar to that of the historical
versions. The results suggest that the CLI may be
a somewhat less valuable real-time forecasting tool
than had generally been believed.
By H.O. Stekler