A systematic comparison of professional exchange rate forecasts with judgmental forecasts of novices : Are there substantial differences?
AbstractThe study at hand deals with the expectations of professional analysts and novices in the context of foreign exchange markets. We analyze the respective forecasting accuracy and our results indicate that there exist substantial differences between professional forecasts and judgmental forecasts of novices. In search of reasonable explanations for the astonishing result, we evaluate the nature of professional and experimental expectations in more detail and find that while professional exchange rate forecasts seem to be biased predictors for the future exchange rates, judgmental forecasts appear to be unbiased. Furthermore, professional forecasters consistently expect a reversal of forgoing exchange rate changes whereas novices expect a continuation of current movements in the short-run and are reversed in the long-run. --
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Bibliographic InfoPaper provided by University of Würzburg, Chair for Monetary Policy and International Economics in its series W.E.P. - Würzburg Economic Papers with number 49.
Date of creation: 2004
Date of revision:
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Foreign exchange market; forecasting; behavioral finance; anchoring heuristics; judgment; expertise; expectation formation;
Find related papers by JEL classification:
- C53 - Mathematical and Quantitative Methods - - Econometric Modeling - - - Forecasting and Prediction Models; Simulation Methods
- F47 - International Economics - - Macroeconomic Aspects of International Trade and Finance - - - Forecasting and Simulation: Models and Applications
- C92 - Mathematical and Quantitative Methods - - Design of Experiments - - - Laboratory, Group Behavior
- G15 - Financial Economics - - General Financial Markets - - - International Financial Markets
- D7 - Microeconomics - - Analysis of Collective Decision-Making
- D81 - Microeconomics - - Information, Knowledge, and Uncertainty - - - Criteria for Decision-Making under Risk and Uncertainty
- D84 - Microeconomics - - Information, Knowledge, and Uncertainty - - - Expectations; Speculations
- G12 - Financial Economics - - General Financial Markets - - - Asset Pricing; Trading Volume; Bond Interest Rates
- E27 - Macroeconomics and Monetary Economics - - Consumption, Saving, Production, Employment, and Investment - - - Forecasting and Simulation: Models and Applications
- F31 - International Economics - - International Finance - - - Foreign Exchange
Please report citation or reference errors to , or , if you are the registered author of the cited work, log in to your RePEc Author Service profile, click on "citations" and make appropriate adjustments.:
- Richard Meese & Kenneth Rogoff, 1983.
"The Out-of-Sample Failure of Empirical Exchange Rate Models: Sampling Error or Misspecification?,"
in: Exchange Rates and International Macroeconomics, pages 67-112
National Bureau of Economic Research, Inc.
- Richard Meese & Kenneth Rogoff, 1982. "The out-of-sample failure of empirical exchange rate models: sampling error or misspecification?," International Finance Discussion Papers 204, Board of Governors of the Federal Reserve System (U.S.).
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