Nowcasting is the prediction of the present, the very near future and the very recent past in economics. It has recently become popular in economics as standard measures used to assess the state of an economy, e.g. gross domestic product (GDP), are only determined after a long delay, and are even then subject to subsequent revisions. With nowcasting we want to monitor the state of the economy in real time.
An economic surprise index compares consensus forecasts for macro data with the actual figures. A positive reading indicates that actual data were better than expected, and vice versa.
Economic momentum looks at longer-term changes in macro data. Has in the past 2-3 years growth been positive or negative?
The common theme in nowcasting, economic surprises and economic momentum is macro data. We are interested in building our own Nowcasts, Economic Surprise Indices and Economic Momentum indicators, with the aim of using it to build successful investment strategies based on macro data. For example Dahlquist and Hasseltoft (2017) show that a trading strategy, that goes long currencies with strong economic momentum and short currencies with weak economic momentum, has a strong performance.
Giannone, D., L. Reichlin, D. Small, 2008. Nowcasting: The real-time informational content of macroeconomic data. Journal of Monetary Economics.
Banbura, M., D. Giannone, M. Modugno, L. Reichlin, 2013. Chapter 4. Nowcasting and the real-time dataflow. In Elliot, G.; Timmerman, A. Handbook of Economic Forecasting, pp195-237.
Dahlquist, M., and H. Hasseltoft, 2017. Economic momentum and currency returns. Working paper Stockholm School of Economics.