Forecasting the Brazilian Real and the Mexican Peso: Asymmetric Loss, Forecast Rationality, and Forecaster Herding
AbstractUsing forecasts of the Brazilian real and the Mexican peso, we analyze the shape of the loss function of exchange-rate forecasters and the rationality of their forecasts. We find a substantial degree of cross-sectional heterogeneity with respect to the shape of the loss function. While some forecasters seem to forecasts under an asymmetric loss function, symmetry of the loss function cannot be rejected for other forecasters. An asymmetric loss function does not necessarily make survey data of exchange-rate forecasts look rational, and the loss function seems to depend not only on the forecast error.
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Bibliographic InfoPaper provided by Hamburg University, Department Wirtschaft und Politik in its series Macroeconomics and Finance Series with number 201202.
Length: 29 pages
Date of creation: Feb 2012
Date of revision:
Exchange rate; Forecasting; Loss function;
Find related papers by JEL classification:
- F31 - International Economics - - International Finance - - - Foreign Exchange
- D84 - Microeconomics - - Information, Knowledge, and Uncertainty - - - Expectations; Speculations
This paper has been announced in the following NEP Reports:
- NEP-ALL-2012-03-08 (All new papers)
- NEP-FOR-2012-03-08 (Forecasting)
- NEP-MON-2012-03-08 (Monetary Economics)
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