The Inverted Curve and Recession: A Hoax, When It Ends?
Yosef Bonaparte (University of Colorado at Denver)
June 17, 2019
The paper shows that the chance inverted curve predicts recession is less than 3.9%, and even not statistically significant. But then we ask why investors still see linkage between inverted curve and recession? The behavior psychology research demonstrates that, for the majority, bad events (such as the 2007 event) register stronger and longer than good events, and vivid in investors’ memory. Finally, we show that the strongest and best predictor for recession is the current GDP growth.
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