Forecasting exchange rates out of sample: random walk vs Markov switching regimes
AbstractA random walk is compared with a Markov switching regimes process in forecasting exchange rates out of sample, using quarterly data on three currencies relative to the US dollar over the period 1973:3-1997:3. The results show that the relative performance of the models varies with the length of the post-sample period suggesting that the availability of more past information may be useful in forecasting future exchange rates.
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Bibliographic InfoArticle provided by Taylor & Francis Journals in its journal Applied Economics Letters.
Volume (Year): 7 (2000)
Issue (Month): 2 ()
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- Lee, Hsiu-Yun & Chen, Show-Lin, 2006. "Why use Markov-switching models in exchange rate prediction?," Economic Modelling, Elsevier, vol. 23(4), pages 662-668, July.
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