Patterns in Exchange Rate Forecasts for 25 Currencies
University of California, Berkeley, Department of Economics, 1993 - Foreign exchange rates - 23 pages
We investigate the properties of exchange rate forecasts with a data set encompassing a broad cross section of currencies. The key finding is that expectations appear to be biased in our sample. This result is robust to the possibility of random measurement error in the survey measures. Investors would be better off placing less weight on their forecasts or the forward rate, and more on the current spot rate.
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12 month horizon 1991 working paper Argentina ASt+k Barry Eichengreen Bayoumi and Barry bias Brz.,Mex Business and Economic Center for International Currency Forecasters Danish Krone Department of Economics Development Economics Research DW LM F EMS currency entire sample Error on Expected European Monetary System European Monetary Unification ex post depreciation Exch Rate EXCHANGE RATE EXPECTATIONS exchange rate forecasts forecast error forward discount forward rate Frankel and Froot French franc harmonic mean heteroskedasticity and serial high-inflation currencies indicates significance Institute of Business Intercept constrained International and Development Irish Punt Jeffrey Frankel major currencies Menzie Chinn Method of Moments month 12 month month No ABM Newey-West null hypothesis OLS regression Patterns in Exchange Peso point estimate Regression of Forecast rejected serial correlation slope coefficient spot rate standard error Steve Phillips survey data survey measures Swiss Franc TABLE Tamim Bayoumi three month horizon unbiasedness University of California