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Are consensus FX forecasts valuable for investors?

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  • Kwas, Marek
  • Beckmann, Joscha
  • Rubaszek, Michał

Abstract

We establish a new link between the cross-section of currency returns and survey-based forecasts. Using data from Consensus Economics, we show that surveys provide trading signals which are not entirely driven by standard benchmark trading strategies such as momentum, carry, or value. We evidence the sizable economic value of survey-based trading strategies, as they provide additional excess returns of up to two percentage points per year compared to benchmarks. This illustrates that professionals effectively explore available information and that their expertise can be used to diversify exchange rate portfolios. Our findings are robust against various tests and different currency portfolios structures.

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  • Kwas, Marek & Beckmann, Joscha & Rubaszek, Michał, 2024. "Are consensus FX forecasts valuable for investors?," International Journal of Forecasting, Elsevier, vol. 40(1), pages 268-284.
    • Handle: RePEc:eee:intfor:v:40:y:2024:i:1:p:268-284
    DOI: 10.1016/j.ijforecast.2023.02.007
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    Cited by:

    1. Beckmann, Joscha & Czudaj, Robert L., 2020. "Fundamental determinants of exchange rate expectations," VfS Annual Conference 2020 (Virtual Conference): Gender Economics 224617, Verein für Socialpolitik / German Economic Association.

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