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Forecasting the Brazilian Real and the Mexican Peso: Asymmetric Loss, Forecast Rationality, and Forecaster Herding

Listed author(s):
  • Ulrich Fritsche

    ()

    (Department for Socioeconomics, Department for Economics, University of Hamburg)

  • Christian Pierdzioch

    ()

    (Helmut-Schmidt-University, Department of Economics)

  • Jan-Christoph Ruelke

    ()

    (WHU – Otto Beisheim School of Management)

  • Georg Stadtmann

    ()

    (University of Southern Denmark, Department of Business and Economics, and European-University Viadrina)

Using 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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File URL: http://www.wiso.uni-hamburg.de/repec/hepdoc/macppr_2_2012.pdf
File Function: First version, 2012
Download Restriction: no

Paper provided by Hamburg University, Department Wirtschaft und Politik in its series Macroeconomics and Finance Series with number 201202.

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Length: 29 pages
Date of creation: Feb 2012
Handle: RePEc:hep:macppr:201202
Contact details of provider: Web page: https://www.wiso.uni-hamburg.de/

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