Rationality And Forecasting Accuracy Of Exchange Rate Expectations: Evidence From Survey-Based Forecasts

ASU Author/Contributor (non-ASU co-authors, if there are any, appear on document)
Onur Ince Ph.D., Assistant Professor (Creator)
Appalachian State University (ASU )
Web Site: https://library.appstate.edu/

Abstract: We examine rationality, forecasting accuracy, and economic value of the survey-based exchange rate forecasts for 10 developed and 23 developing countries at the 3-, 12-, and 24-month horizons. Using the data from two surveys for the period from 2004 to 2012, we find strong evidence that the forecasts for developing countries are biased at all forecast horizons. For developed countries, forecasts are strongly biased at the 3-month horizon, the bias decreases at the 12- month horizon, and increases again at the 24-month horizon. Based on the magnitude of the forecast errors and the direction of change, long-term forecasts are more accurate than short-term forecasts. Economic evaluation of the forecasts indicates that the forecasters are successful at generating positive economic profits, and economic gains of the forecasts for developed countries improve with the forecast horizon.

Additional Information

Ince, O. and T. Molodtsova (2017). "Rationality and forecasting accuracy of exchange rate expectations: Evidence from survey-based forecasts." Journal of International Financial Markets, Institutions and Money 47: 131-151. https:// doi.org/10.1016/j.intfin.2016.11.002. Publisher version of record available: https://www.sciencedirect.com/science/article/pii/S1042443116301536
Language: English
Date: 2016
Survey expectations, Exchange rates, Rationality, Forecasting

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