Download or read book Testing the predictive power of various exchange rate models in forecasting the volatility of exchange rate written by Prince Obeng and published by . This book was released on 2016 with total page 0 pages. Available in PDF, EPUB and Kindle. Book excerpt:
Download or read book Testing the Predictive Power of Various Exchange Rate Models in Forecasting the Volatility of Exchange written by Prince Obeng and published by . This book was released on 2016 with total page pages. Available in PDF, EPUB and Kindle. Book excerpt: This Thesis tests the predictive power of ARCH, GARCH and EGARCH models in forecasting exchange rate volatility of Canadian dollar, Euro, British Pound, Swiss Franc and Japanese Yen using the US dollar as the base currency. We investigate both in-sample and out-of-sample performance of the volatility models using loss functions. The study further examines if the best model for the in-sample forecast will emerge as the best model for the out-of-sample forecast. The study finds that the GARCH(1,1) model outperforms all the other volatility models during the in-sample period. However in terms of the out-of-sample performance of the volatility models, the results are inconclusive, even though the ARCH model performed better most of the time than the complex models. The study concludes that the simple models should be given special consideration in terms of forecasting. Our results are robust to research on exchange rate volatility forecasting.
Download or read book The Predictive Ability of Several Models of Exchange Rate Volatility written by Kenneth David West and published by . This book was released on 1994 with total page 24 pages. Available in PDF, EPUB and Kindle. Book excerpt: We compare the out-of-sample forecasting performance of univariate homoskedastic, GARCH, autoregressive and nonparametric models for conditional variances, using five bilateral weekly exchange rates for the dollar, 1973-1989. For a one week horizon, GARCH models tend to make slightly more accurate forecasts. For longer horizons, it is difficult to find grounds for choosing between the various models. None of the models perform well in a conventional test of forecast efficiency
Download or read book NBER Macroeconomics Annual 2007 written by Daron Acemoglu and published by . This book was released on 2008-03 with total page 0 pages. Available in PDF, EPUB and Kindle. Book excerpt: The NBER Macroeconomics Annual provides a forum for important debates in contemporary macroeconomics and major developments in the theory of macroeconomic analysis and policy that include leading economists from a variety of fields. The papers and accompanying discussions in NBER Macroeconomics Annual 2007 address exchange-rate models; implications of credit market frictions; cyclical budgetary policy and economic growth; the impacts of shocks to government spending on consumption, real wages, and employment; dynamic macroeconomic models; and the role of cyclical entry of new firms and products on the nature of business-cycle fluctuations and on the effects of monetary policy.
Download or read book Foreign Exchange Rates written by Arif Orçun Söylemez and published by Routledge. This book was released on 2021-02-08 with total page 0 pages. Available in PDF, EPUB and Kindle. Book excerpt: Predicting foreign exchange rates has presented a long-standing challenge for economists. However, the recent advances in computational techniques, statistical methods, newer datasets on emerging market currencies, etc., offer some hope. While we are still unable to beat a driftless random walk model, there has been serious progress in the field. This book provides an in-depth assessment of the use of novel statistical approaches and machine learning tools in predicting foreign exchange rate movement. First, it offers a historical account of how exchange rate regimes have evolved over time, which is critical to understanding turning points in a historical time series. It then presents an overview of the previous attempts at modeling exchange rates, and how different methods fared during this process. At the core sections of the book, the author examines the time series characteristics of exchange rates and how contemporary statistics and machine learning can be useful in improving predictive power, compared to previous methods used. Exchange rate determination is an active research area, and this book will appeal to graduate-level students of international economics, international finance, open economy macroeconomics, and management. The book is written in a clear, engaging, and straightforward way, and will greatly improve access to this much-needed knowledge in the field.
Download or read book Nonlinear Exchange Rate Models written by Lucio Sarno and published by International Monetary Fund. This book was released on 2003-05-01 with total page 40 pages. Available in PDF, EPUB and Kindle. Book excerpt: This paper provides a selective overview of nonlinear exchange rate models recently proposed in the literature and assesses their contribution to understanding exchange rate behavior. Two key questions are examined. The first question is whether nonlinear autoregressive models of real exchange rates help resolve the "purchasing power parity (PPP) puzzles." The second question is whether recently developed nonlinear, regime-switching vector equilibrium correction models of the nominal exchange rate can beat a random walk model, the standard benchmark in the exchange rate literature, in terms of out-of-sample forecasting performance. Finally, issues related to the adequateness of standard methods of evaluation of (linear and nonlinear) exchange rate models are discussed with reference to different forecast accuracy criteria.
Download or read book Exchange Rate Modelling written by Ronald MacDonald and published by Springer Science & Business Media. This book was released on 2013-04-17 with total page 226 pages. Available in PDF, EPUB and Kindle. Book excerpt: Are foreign exchange markets efficient? Are fundamentals important for predicting exchange rate movements? What is the signal-to-ratio of high frequency exchange rate changes? Is it possible to define a measure of the equilibrium exchange rate that is useful from an assessment perspective? The book is a selective survey of current thinking on key topics in exchange rate economics, supplemented throughout by new empirical evidence. The focus is on the use of advanced econometric tools to find answers to these and other questions which are important to practitioners, policy-makers and academic economists. In addition, the book addresses more technical econometric considerations such as the importance of the choice between single-equation and system-wide approaches to modelling the exchange rate, and the reduced form versus structural equation problems. Readers will gain both a comprehensive overview of the way macroeconomists approach exchange rate modelling, and an understanding of how advanced techniques can help them explain and predict the behavior of this crucial economic variable.
Download or read book The Predictive Power of Equilibrium Exchange Rate Models written by Michele Ca'Zorzi and published by . This book was released on 2020 with total page pages. Available in PDF, EPUB and Kindle. Book excerpt: In this paper we evaluate the predictive power of the three most popular equilibrium exchange rate concepts: Purchasing Power Parity (PPP), Behavioral Equilibrium Exchange Rate (BEER) and the Macroeconomic Balance (MB) approach. We show that there is a clear trade-off between storytelling and forecast accuracy. The PPP model offers little economic insights, but has good predictive power. The BEER framework, which links exchange rates to fundamentals, does not deliver forecasts of better quality than PPP. The MB approach has the most appealing economic interpretation, but performs poorly in forecasting terms. Sensitivity analysis confirms that changing the composition of fundamentals in the BEER model or modifying key underlying assumptions in the MB model does not generally enhance their predictive power.
Download or read book Forecasting Exchange Rate Volatility written by Guillermo Benavides and published by . This book was released on 2009 with total page 34 pages. Available in PDF, EPUB and Kindle. Book excerpt: This paper shows that combinations of option implied and time series volatility forecasts that are conditional on current information are statistically superior to individual models, (unconditional) combinations, and hybrid forecasts. Hence, it finds empirical evidence that both, combining individual forecasts, and taking into account the conditional expected performance of each model given current information, are important to improve out-of-sample forecasting performance. The method used in this paper extends the application of conditional predictive ability tests to select forecast combinations. We show that this method works well in practice by applying it to volatility forecasts for the Mexican Peso-US Dollar exchange rate, where the actual value is taken to be the realized volatility measured using intra-day observations.
Download or read book Empirical Modeling of Exchange Rate Dynamics written by Francis X. Diebold and published by Springer. This book was released on 1988 with total page 170 pages. Available in PDF, EPUB and Kindle. Book excerpt:
Download or read book The Monetary Model of Exchange Rates and Cointegration written by Javier Gardeazabal and published by Springer. This book was released on 1992 with total page 212 pages. Available in PDF, EPUB and Kindle. Book excerpt:
Download or read book Conventional and Unconventional Approaches to Exchange Rate Modeling and Assessment written by Ron Alquist and published by . This book was released on 2006 with total page 48 pages. Available in PDF, EPUB and Kindle. Book excerpt: We examine the relative predictive power of the sticky price monetary model, uncovered interest parity, and a transformation of net exports and net foreign assets. In addition to bringing Gourinchas and Rey's new approach and more recent data to bear, we implement the Clark and West (forthcoming) procedure for testing the significance of out-of-sample forecasts. The interest rate parity relation holds better at long horizons and the net exports variable does well in predicting exchange rates at short horizons in-sample. In out-of-sample forecasts, we find evidence that our proxy for Gourinchas and Rey's measure of external imbalances outperforms a random walk at short horizons as do some of other models, although no single model uniformly outperforms the random walk forecast.
Download or read book Exchange Rate Forecasting written by Jon Faust and published by . This book was released on 2001 with total page 44 pages. Available in PDF, EPUB and Kindle. Book excerpt:
Download or read book The Predictive Power of Behavioral Economics in the Foreign Exchange Market written by Vajiheh Mahdiyan Amirabadi and published by . This book was released on 2022 with total page 0 pages. Available in PDF, EPUB and Kindle. Book excerpt: This dissertation explores the out-of-sample forecastability of changes in exchange rates using behavioral economics and combination methods and contributes to the literature by introducing three approaches presented in three essays. The first essay explores a new approach through behavioral heuristics to forecast changes in exchange rates. One key aspect of behavioral economics is that people do not use the realized distribution of historical data to predict variables. Instead, agents assign subjective probabilities which depend on heuristics in decision-making. These subjective probabilities are used as weights for the ten years of observations prior to time t in linear models of changes in exchange rates to estimate coefficients and form forecasts. This essay develops forecasting models for exchange rates using monthly data for the US dollar versus 37 (advanced and emerging/developing) currencies. The second essay incorporates behavioral economics by adding investor sentiment variables to macroeconomic models to form forecasts for exchange rates. In addition, I examine the predictive ability of a terms of trade index (in changes) both as a single predictor and as an added predictor in the uncovered interest rate parity model. Finally, I examine changes in commodity and oil prices (nominal and real) as predictors of changes in exchange rates. Some models provide promising results for some currencies using Pesaran-Timmermann (PT) statistics in both essays. In the first essay, models under the assumptions of anchoring-toward and optimism perform well. In the second essay, macroeconomic models augmented by behavioral factors outperform the White Noise (WN) model for several countries. The third essay of the dissertation addresses model uncertainty. It focuses on combining forecasts from various individual models introduced in the second essay. I use standard (e.g., equal weights) and new forecast combination approaches to form combined forecasts. Using a regularization technique (Ridge regression), I apply linear and convex combination estimates to combine forecasts. I propose Directional Prediction as a new weighting approach. The results indicate that for several countries, the linear combination (Ridge regression) weighting approach has proportions of correct direction of changes in exchange rates greater than 0.5, which means it performs better than the WN model.
Download or read book Handbook of Exchange Rates written by Jessica James and published by John Wiley & Sons. This book was released on 2012-05-29 with total page 674 pages. Available in PDF, EPUB and Kindle. Book excerpt: Praise for Handbook of Exchange Rates “This book is remarkable. I expect it to become the anchor reference for people working in the foreign exchange field.” —Richard K. Lyons, Dean and Professor of Finance, Haas School of Business, University of California Berkeley “It is quite easily the most wide ranging treaty of expertise on the forex market I have ever come across. I will be keeping a copy close to my fingertips.” —Jim O’Neill, Chairman, Goldman Sachs Asset Management How should we evaluate the forecasting power of models? What are appropriate loss functions for major market participants? Is the exchange rate the only means of adjustment? Handbook of Exchange Rates answers these questions and many more, equipping readers with the relevant concepts and policies for working in today’s international economic climate. Featuring contributions written by leading specialists from the global financial arena, this handbook provides a collection of original ideas on foreign exchange (FX) rates in four succinct sections: • Overview introduces the history of the FX market and exchange rate regimes, discussing key instruments in the trading environment as well as macro and micro approaches to FX determination. • Exchange Rate Models and Methods focuses on forecasting exchange rates, featuring methodological contributions on the statistical methods for evaluating forecast performance, parity relationships, fair value models, and flow–based models. • FX Markets and Products outlines active currency management, currency hedging, hedge accounting; high frequency and algorithmic trading in FX; and FX strategy-based products. • FX Markets and Policy explores the current policies in place in global markets and presents a framework for analyzing financial crises. Throughout the book, topics are explored in-depth alongside their founding principles. Each chapter uses real-world examples from the financial industry and concludes with a summary that outlines key points and concepts. Handbook of Exchange Rates is an essential reference for fund managers and investors as well as practitioners and researchers working in finance, banking, business, and econometrics. The book also serves as a valuable supplement for courses on economics, business, and international finance at the upper-undergraduate and graduate levels.
Download or read book Exchange Rate Forecasting Techniques Survey Data and Implications for the Foreign Exchange Market written by Jeffrey A. Frankel and published by . This book was released on 1990 with total page 42 pages. Available in PDF, EPUB and Kindle. Book excerpt: The paper presents new empirical results that elucidate the dynamics of the foreign exchange market. The first half of the paper is an updated study of the exchange rate expectations held by market participants, as reflected in responses to surveys, and contains the following conclusions. First, the bias observed in the forward discount as a predictor of the future spot rate is not attributable to an exchange risk premium, as is conventionally believed. Second, at short horizons forecasters tend to extrapolate recent trends, while at long horizons they tend to forecast a reversal. Third, the bias in expectations is robust in the samples, based on eight years of data across five currencies. The second half of the paper abandons the framework in which all market participants share the same forecast, to focus on the importance of heterogeneous expectations. Tests suggest that dispersion of opinion, as reflected in the standard deviation across respondents in the survey, affects the volume of trading in the market, and, in turn, the degree of volatility of the exchange rate. An example of how conflicting forecasts can lead to swings in the exchange rate is the model of "chartists and fundamentalists." The market weights assigned to the two models fluctuate over time in response to recent developments, leading to fluctuations in the demand for foreign currency. The paper ends with one piece of evidence to support the model: the fraction of foreign exchange forecasting services that use "technical analysis" did indeed increase sharply during 1983-85, but declined subsequently
Download or read book Excess Volatility and the Asset Pricing Exchange Rate Model with Unobservable Fundamentals written by Mr. Lorenzo Giorgianni and published by International Monetary Fund. This book was released on 1999-05-01 with total page 22 pages. Available in PDF, EPUB and Kindle. Book excerpt: This paper presents a method to test the volatility predictions of the textbook asset-pricing exchange rate model, which imposes minimal structure on the data and does not commit to a choice of exchange rate “fundamentals.” Our method builds on existing tests of excess volatility in asset prices, combining them with a procedure that extracts unobservable fundamentals from survey-based exchange rate expectations. We apply our method to data for the three major exchange rates since 1984 and find broad evidence of excess exchange rate volatility with respect to the predictions of the canonical asset-pricing model in an efficient market.
