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Computational Intelligence in Exchange-Rate Forecasting

  • Andreas S. Andreou

    (University of Cyprus)

  • George A. Zombanakis

    ()

    (Bank of Greece)

This paper applies computational intelligence methods to exchange rate forecasting. In particular, it employs neural network methodology in order to predict developments of the Euro exchange rate versus the U.S. Dollar and the Japanese Yen. Following a study of our series using traditional as well as specialized, non-parametric methods together with Monte Carlo simulations we employ selected Neural Networks (NNs) trained to forecast rate fluctuations. Despite the fact that the data series have been shown by the Rescaled Range Statistic (R/S) analysis to exhibit random behaviour, their internal dynamics have been successfully captured by certain NN topologies, thus yielding accurate predictions of the two exchange-rate series.

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File URL: http://www.bankofgreece.gr/BogEkdoseis/Paper200649.pdf
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Paper provided by Bank of Greece in its series Working Papers with number 49.

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Length: 43 pages
Date of creation: Nov 2006
Date of revision:
Handle: RePEc:bog:wpaper:49
Contact details of provider: Web page: http://www.bankofgreece.gr
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  1. Panayotis Kapopoulos & Sophia Lazaretou, 2005. "Does Corporate Ownership Structure Matter for Economic Growth? A Cross-Country Analysis," Working Papers 21, Bank of Greece.
  2. Marsh, Ian W. & Power, David M., 1996. "A note on the performance of foreign exchange forecasters in a portfolio framework," Journal of Banking & Finance, Elsevier, vol. 20(3), pages 605-613, April.
  3. Kilian, Lutz & Taylor, Mark P, 2001. "Why is it so Difficult to Beat the Random Walk Forecast of Exchange Rates?," CEPR Discussion Papers 3024, C.E.P.R. Discussion Papers.
  4. Martin D.D. Evans & Richard K. Lyons, 2005. "Meese-Rogoff Redux: Micro-Based Exchange Rate Forecasting," NBER Working Papers 11042, National Bureau of Economic Research, Inc.
  5. repec:att:wimass:9317 is not listed on IDEAS
  6. Hans Genberg, 2006. "Exchange-Rate Arrangements and Financial Integration in East Asia: On a Collision Course?," Working Papers 41, Bank of Greece.
  7. Pesaran, M Hashem & Potter, Simon M, 1992. "Nonlinear Dynamics and Econometrics: An Introduction," Journal of Applied Econometrics, John Wiley & Sons, Ltd., vol. 7(S), pages S1-7, Suppl. De.
  8. West, K.D. & Cho, D., 1993. "The Predictive Ability of Several Models of Exchange Rate Volatility," Working papers 9317r, Wisconsin Madison - Social Systems.
  9. Charles Engel & Kenneth D. West, 2004. "Accounting for Exchange Rate Variability in Present-Value Models When the Discount Factor is Near One," NBER Working Papers 10267, National Bureau of Economic Research, Inc.
  10. Meese, Richard A. & Rogoff, Kenneth, 1983. "Empirical exchange rate models of the seventies : Do they fit out of sample?," Journal of International Economics, Elsevier, vol. 14(1-2), pages 3-24, February.
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