So far, economic fluctuations have been predicted almost exclusively through the aggregate infor- mation conveyed either by i) macro variables (labor market conditions, money, credit, lagged growth), ii) financial indicators (aggregate stock market returns and variances, slope of the yield curve, credit spreads) or iii) confidence (households or business) indicators. Focusing on models including aggre- gate financial variables, which are also the focus of the present paper, a broad conclusion reached by analyses carried out so far is that their predictive power is broadly unstable over time and also that the set of indicators which are key to improve the forecast of business cycle developments tends.
