Abstract
Leading economic indicators provide a glimpse into the future economic scenario, which help predict future business conditions. Do changes in leading economic indicators help predict future stock volatility? Do different shock sizes of this indicator caused by an uncertain financial environment provide valid information for forecasting stock market volatility? To answer this question, this paper investigates the predictive performance of composite leading indicator (CLI) shock sizes on stock price volatility under the framework of the GARCH-MIDAS model from an innovative perspective. Interestingly, we find that the asymmetric shock sizes of the CLI perform best both in a statistical and economic sense.
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