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Over-optimism Bias in Market Analysts' Forecasts: The Case of the Australian Dollar

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  • Suri Rajapakse
  • Mahinda Siriwardana

Abstract

Accurate forecasting of future exchange rates are of vital importance for firms and portfolio managers in the management of risk in international transactions. These enterprises frequently resort to the forecasts of market analysts as a viable source. In the meantime, market analysts' forecasts of the Australian dollar seem to be driven by over-optimism bias similar to that found by Mande et al. (2003) with respect to US and Japanese earnings forecasts. An examination of analysts' short-term forecasts of the Australian dollar reveals that they are subject to substantial over-optimism bias. The present research is an attempt to establish such empirical evidence of over-optimism bias in the context of Australian dollar forecasts. The findings of the research will be useful to business and government in the management of international transactions.

Suggested Citation

  • Suri Rajapakse & Mahinda Siriwardana, 2007. "Over-optimism Bias in Market Analysts' Forecasts: The Case of the Australian Dollar," Journal of the Asia Pacific Economy, Taylor & Francis Journals, vol. 12(1), pages 103-113.
    • Handle: RePEc:taf:rjapxx:v:12:y:2007:i:1:p:103-113
    DOI: 10.1080/13547860601083769
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    Cited by:

    1. Bekiros, Stelios & Jlassi, Mouna & Naoui, Kamel & Uddin, Gazi Salah, 2018. "Risk perception in financial markets: On the flip side," International Review of Financial Analysis, Elsevier, vol. 57(C), pages 184-206.

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