IDEAS home Printed from https://ideas.repec.org/a/taf/apeclt/v19y2012i18p1759-1763.html
   My bibliography  Save this article

Exchange-rate forecasts and asymmetric loss: empirical evidence for the yen/dollar exchange rate

Author

Listed:
  • Christian Pierdzioch
  • Jan-Christoph Rülke
  • Georg Stadtmann

Abstract

We used the yen/dollar exchange-rate forecasts of the Wall Street Journal (WSJ) poll to analyse whether exchange-rate forecasters have an asymmetric loss function. To this end, we applied an approach recently developed by Elliott et al . (2005). We found that only few forecasters seem to form forecasts under an asymmetric loss function. For some forecasters, accounting for the asymmetry of their loss function makes their forecasts look rational.

Suggested Citation

  • Christian Pierdzioch & Jan-Christoph Rülke & Georg Stadtmann, 2012. "Exchange-rate forecasts and asymmetric loss: empirical evidence for the yen/dollar exchange rate," Applied Economics Letters, Taylor & Francis Journals, vol. 19(18), pages 1759-1763, December.
    • Handle: RePEc:taf:apeclt:v:19:y:2012:i:18:p:1759-1763
    DOI: 10.1080/13504851.2012.659338
    as

    Download full text from publisher

    File URL: http://hdl.handle.net/10.1080/13504851.2012.659338
    Download Restriction: Access to full text is restricted to subscribers.
    File URL: https://libkey.io/10.1080/13504851.2012.659338?utm_source=ideas
    LibKey link: if access is restricted and if your library uses this service, LibKey will redirect you to where you can use your library subscription to access this item
    ---><---

    As the access to this document is restricted, you may want to search for a different version of it.

    References listed on IDEAS

    as
    1. Elliott, Graham & Ito, Takatoshi, 1999. "Heterogeneous expectations and tests of efficiency in the yen/dollar forward exchange rate market," Journal of Monetary Economics, Elsevier, vol. 43(2), pages 435-456, April.
    2. Benassy-Quere, Agnes & Larribeau, Sophie & MacDonald, Ronald, 2003. "Models of exchange rate expectations: how much heterogeneity?," Journal of International Financial Markets, Institutions and Money, Elsevier, vol. 13(2), pages 113-136, April.
    3. Kilian, Lutz & Taylor, Mark P., 2003. "Why is it so difficult to beat the random walk forecast of exchange rates?," Journal of International Economics, Elsevier, vol. 60(1), pages 85-107, May.
    4. Graham Elliott & Allan Timmermann & Ivana Komunjer, 2005. "Estimation and Testing of Forecast Rationality under Flexible Loss," The Review of Economic Studies, Review of Economic Studies Ltd, vol. 72(4), pages 1107-1125.
    5. Abhyankar, Abhay & Sarno, Lucio & Valente, Giorgio, 2005. "Exchange rates and fundamentals: evidence on the economic value of predictability," Journal of International Economics, Elsevier, vol. 66(2), pages 325-348, July.
    6. Sarno,Lucio & Taylor,Mark P., 2003. "The Economics of Exchange Rates," Cambridge Books, Cambridge University Press, number 9780521485845.
    7. Graham Elliott & Ivana Komunjer & Allan Timmermann, 2008. "Biases in Macroeconomic Forecasts: Irrationality or Asymmetric Loss?," Journal of the European Economic Association, MIT Press, vol. 6(1), pages 122-157, March.
    8. Macdonald, Ronald & Marsh, Ian W., 1996. "Currency forecasters are heterogeneous: confirmation and consequences," Journal of International Money and Finance, Elsevier, vol. 15(5), pages 665-685, October.
    9. Reitz, Stefan & Stadtmann, Georg & Taylor, Mark P., 2010. "The effects of Japanese interventions on FX-forecast heterogeneity," Economics Letters, Elsevier, vol. 108(1), pages 62-64, July.
    10. Christian Pierdzioch & Georg Stadtmann, 2011. "Do exchange-rate forecasters herd?," Applied Economics Letters, Taylor & Francis Journals, vol. 18(8), pages 739-741.
    11. Batchelor, Roy & Peel, David A., 1998. "Rationality testing under asymmetric loss," Economics Letters, Elsevier, vol. 61(1), pages 49-54, October.
    Full references (including those not matched with items on IDEAS)

    Citations

    Citations are extracted by the CitEc Project, subscribe to its RSS feed for this item.
    as


    Cited by:

    1. Pierdzioch, Christian & Rülke, Jan-Christoph & Stadtmann, Georg, 2015. "Central banks’ inflation forecasts under asymmetric loss: Evidence from four Latin-American countries," Economics Letters, Elsevier, vol. 129(C), pages 66-70.
    2. Fritsche, Ulrich & Pierdzioch, Christian & Rülke, Jan-Christoph & Stadtmann, Georg, 2015. "Forecasting the Brazilian real and the Mexican peso: Asymmetric loss, forecast rationality, and forecaster herding," International Journal of Forecasting, Elsevier, vol. 31(1), pages 130-139.
    3. Tsuchiya, Yoichi, 2015. "Herding behavior and loss functions of exchange rate forecasters over interventions and financial crises," International Review of Economics & Finance, Elsevier, vol. 39(C), pages 266-276.
    4. Michael Frenkel & Matthias Mauch & Jan-Christoph Rülke, 2017. "Forecaster Rationality and Expectation Formation in Foreign Exchange Markets: Do Emerging Markets Differ from Industrialized Economies?," WHU Working Paper Series - Economics Group 17-04, WHU - Otto Beisheim School of Management.
    5. Tsuchiya, Yoichi, 2016. "Asymmetric loss and rationality of Chinese renminbi forecasts: An implication for the trade between China and the US," Journal of International Financial Markets, Institutions and Money, Elsevier, vol. 44(C), pages 116-127.

    Most related items

    These are the items that most often cite the same works as this one and are cited by the same works as this one.
    1. Ronald MacDonald & Lukas Menkhoff & Rafael R. Rebitzky, 2009. "Exchange Rate Forecasters' Performance: Evidence of Skill?," CESifo Working Paper Series 2615, CESifo.
    2. Menkhoff, Lukas & Rebitzky, Rafael R. & Schröder, Michael, 2009. "Heterogeneity in exchange rate expectations: Evidence on the chartist-fundamentalist approach," Journal of Economic Behavior & Organization, Elsevier, vol. 70(1-2), pages 241-252, May.
    3. MacDonald, Ronald & Menkhoff, Lukas & Rebitzky, Rafael R., 2009. "Exchange rate forecasters’ performance: evidence of skill?," SIRE Discussion Papers 2009-10, Scottish Institute for Research in Economics (SIRE).
    4. Fritsche, Ulrich & Pierdzioch, Christian & Rülke, Jan-Christoph & Stadtmann, Georg, 2015. "Forecasting the Brazilian real and the Mexican peso: Asymmetric loss, forecast rationality, and forecaster herding," International Journal of Forecasting, Elsevier, vol. 31(1), pages 130-139.
    5. Hamid Baghestani, 2010. "Evaluating Blue Chip forecasts of the trade-weighted dollar exchange rate," Applied Financial Economics, Taylor & Francis Journals, vol. 20(24), pages 1879-1889.
    6. Audretsch, David B. & Stadtmann, Georg, 2005. "Biases in FX-forecasts: Evidence from panel data," Global Finance Journal, Elsevier, vol. 16(1), pages 99-111, August.
    7. Kunze, Frederik, 2017. "Predicting exchange rates in Asia: New insights on the accuracy of survey forecasts," University of Göttingen Working Papers in Economics 326, University of Goettingen, Department of Economics.
    8. Ulrich Fritsche & Christian Pierdzioch & Jan-Christoph R�lke & Georg Stadtmann, 2014. "A Note on Forecasting the Euro: Do Forecasters Have an Asymmetric Loss Function?," International Economic Journal, Taylor & Francis Journals, vol. 28(2), pages 333-343, June.
    9. Bernhard O. Ishioro, 2014. "The Dynamics Of Exchange Rate Expectations Formation: The Nigerian Perspective," Economic Thought and Practice, Department of Economics and Business, University of Dubrovnik, vol. 23(2), pages 431-460, december.
    10. Pierdzioch, Christian & Schäfer, Dirk & Stadtmann, Georg, 2010. "Fly with the eagles or scratch with the chickens? Zum Herdenverhalten von Wechselkursprognostikern," Discussion Papers 287, European University Viadrina Frankfurt (Oder), Department of Business Administration and Economics.
    11. Reitz, Stefan & Stadtmann, Georg & Taylor, Mark P., 2010. "The effects of Japanese interventions on FX-forecast heterogeneity," Economics Letters, Elsevier, vol. 108(1), pages 62-64, July.
    12. Koske, Isabell & Stadtmann, Georg, 2009. "Exchange rate expectations: The role of person specific forward looking variables," Economics Letters, Elsevier, vol. 105(3), pages 221-223, December.
    13. Pierdzioch, Christian & Rülke, Jan-Christoph & Stadtmann, Georg, 2013. "A note on forecasting the prices of gold and silver: Asymmetric loss and forecast rationality," The Quarterly Review of Economics and Finance, Elsevier, vol. 53(3), pages 294-301.
    14. Christian Pierdzioch & Jan-Christoph Rülke & Georg Stadtmann, 2013. "Oil price forecasting under asymmetric loss," Applied Economics, Taylor & Francis Journals, vol. 45(17), pages 2371-2379, June.
    15. Christodoulakis, George & Mamatzakis, Emmanuel, 2013. "Behavioural asymmetries in the G7 foreign exchange market," International Review of Financial Analysis, Elsevier, vol. 29(C), pages 261-270.
    16. Ruelke, Jan C. & Frenkel, Michael R. & Stadtmann, Georg, 2010. "Expectations on the yen/dollar exchange rate - Evidence from the Wall Street Journal forecast poll," Journal of the Japanese and International Economies, Elsevier, vol. 24(3), pages 355-368, September.
    17. Tsuchiya, Yoichi, 2015. "Herding behavior and loss functions of exchange rate forecasters over interventions and financial crises," International Review of Economics & Finance, Elsevier, vol. 39(C), pages 266-276.
    18. Reitz, Stefan & Rülke, Jan-Christoph & Stadtmann, Georg, 2012. "Nonlinear expectations in speculative markets – Evidence from the ECB survey of professional forecasters," Journal of Economic Dynamics and Control, Elsevier, vol. 36(9), pages 1349-1363.
    19. Barbara Rossi, 2013. "Exchange Rate Predictability," Journal of Economic Literature, American Economic Association, vol. 51(4), pages 1063-1119, December.
    20. Sager, Michael & Taylor, Mark P., 2014. "Generating currency trading rules from the term structure of forward foreign exchange premia," Journal of International Money and Finance, Elsevier, vol. 44(C), pages 230-250.

    More about this item

    Statistics

    Access and download statistics

    Corrections

    All material on this site has been provided by the respective publishers and authors. You can help correct errors and omissions. When requesting a correction, please mention this item's handle: RePEc:taf:apeclt:v:19:y:2012:i:18:p:1759-1763. See general information about how to correct material in RePEc.

    If you have authored this item and are not yet registered with RePEc, we encourage you to do it here. This allows to link your profile to this item. It also allows you to accept potential citations to this item that we are uncertain about.

    If CitEc recognized a bibliographic reference but did not link an item in RePEc to it, you can help with this form .

    If you know of missing items citing this one, you can help us creating those links by adding the relevant references in the same way as above, for each refering item. If you are a registered author of this item, you may also want to check the "citations" tab in your RePEc Author Service profile, as there may be some citations waiting for confirmation.

    For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: Chris Longhurst (email available below). General contact details of provider: http://www.tandfonline.com/RAEL20 .

    Please note that corrections may take a couple of weeks to filter through the various RePEc services.

    IDEAS is a RePEc service. RePEc uses bibliographic data supplied by the respective publishers.