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Combining information in exchange rate forecasting: evidence from the EMS

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  • Fernando Fernandez-Rodriguez
  • Simon Sosvilla-Rivero Julian

Abstract

In this paper we propose a multivariate local predictor, inspired in the literature on deterministic chaos, and apply it to nine EMS currencies, using daily data for the January 1973-December 1994 period. Our local predictors perform marginally better than a random walk in forecasting the nominal exchange rate, clearly outperforming the random walk directional forecast.

Suggested Citation

  • Fernando Fernandez-Rodriguez & Simon Sosvilla-Rivero Julian, 1997. "Combining information in exchange rate forecasting: evidence from the EMS," Applied Economics Letters, Taylor & Francis Journals, vol. 4(7), pages 441-444.
  • Handle: RePEc:taf:apeclt:v:4:y:1997:i:7:p:441-444
    DOI: 10.1080/135048597355221
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    Cited by:

    1. Fernandez-Rodriguez, Fernando & Sosvilla-Rivero, Simon, 1998. "Testing nonlinear forecastability in time series: Theory and evidence from the EMS," Economics Letters, Elsevier, vol. 59(1), pages 49-63, April.
    2. Fernandez-Rodriguez, Fernando & Sosvilla-Rivero, Simon & Andrada-Felix, Julian, 1999. "Exchange-rate forecasts with simultaneous nearest-neighbour methods: evidence from the EMS," International Journal of Forecasting, Elsevier, vol. 15(4), pages 383-392, October.
    3. Fernando Fernández-Rodríguez & Simón Sosvilla-Rivero & Julián Andrada-Félix, "undated". "Nearest-Neighbour Predictions in Foreign Exchange Markets," Working Papers 2002-05, FEDEA.
    4. Fernando Fernandez-Rodriguez & Simon Sosvilla-Rivero & Maria Dolores Garcia-Artiles, 1997. "Using nearest neighbour predictors to forecast the Spanish stock market," Investigaciones Economicas, Fundación SEPI, vol. 21(1), pages 75-91, January.

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