Arbeitspapier
Forecasting Exchange Rates: An Investor Perspective
The popular scholarly exercise of evaluating exchange rate forecasting models relative to a random walk was stimulated by the well-cited Meese and Rogoff (1983) paper. Practitioners who construct quantitative models for trading exchange rates approach forecasting from a different perspective. Rather than focus on forecast errors for bilateral exchange rates, as in the Meese-Rogoff case, we present what is required for constructing a successful trading model. To provide more perspective, a particular approach to quantitative modeling is presented that incorporates return forecasts, a risk model, and a transaction cost constraint in an optimization framework. Since beating a random walk is not a useful evaluation metric for currency investing, we discuss the use of benchmarks and conclude that performance evaluation in currencies is much more problematic than in equity markets due to the lack of a passive investment strategy and the multitude of alternative formulations of well-known currency style factors. We then provide analytical tools that can be useful in evaluating currency manager skill in terms of portfolio tilts and timing. Finally, we examine how conditioning information can be employed to enhance timing skill in trading generic styles like the carry trade. Such information can be valuable in reducing the duration and magnitude of portfolio drawdowns.
- Sprache
-
Englisch
- Erschienen in
-
Series: CESifo Working Paper ; No. 4238
- Klassifikation
-
Wirtschaft
Model Evaluation, Validation, and Selection
Forecasting Models; Simulation Methods
Financial Econometrics
Foreign Exchange
International Finance Forecasting and Simulation: Models and Applications
International Financial Markets
Financial Forecasting and Simulation
- Thema
-
exchange rate forecasting
forecast evaluation
conditioners
quantitative models
benchmarks
- Ereignis
-
Geistige Schöpfung
- (wer)
-
Melvin, Michael
Prins, John
Shand, Duncan
- Ereignis
-
Veröffentlichung
- (wer)
-
Center for Economic Studies and ifo Institute (CESifo)
- (wo)
-
Munich
- (wann)
-
2013
- Handle
- Letzte Aktualisierung
-
10.03.2025, 11:43 MEZ
Datenpartner
ZBW - Deutsche Zentralbibliothek für Wirtschaftswissenschaften - Leibniz-Informationszentrum Wirtschaft. Bei Fragen zum Objekt wenden Sie sich bitte an den Datenpartner.
Objekttyp
- Arbeitspapier
Beteiligte
- Melvin, Michael
- Prins, John
- Shand, Duncan
- Center for Economic Studies and ifo Institute (CESifo)
Entstanden
- 2013
Ähnliche Objekte (12)
Exchange rate forecasting on a napkin
Selective Attention in Exchange Rate Forecasting
Exchange rate forecasting with DSGE models
Selective Attention in Exchange Rate Forecasting
Forecasting Exchange Rates with Commodity Convenience Yields
Can macroeconomists get rich forecasting exchange rates?
Forecasting exchange rates with a large Bayesian VAR
Forecasting sectoral trade growth under flexible exchange rates
Forecasting sectoral trade growth under flexible exchange rates
Adaptive forecasting of exchange rates with panel data
Exchange rate forecasting with advanced machine learning methods
Intraday foreign exchange rate forecasting using sparse grids
Exchange rate forecasting on a napkin
Selective Attention in Exchange Rate Forecasting
Exchange rate forecasting with DSGE models
Selective Attention in Exchange Rate Forecasting
Forecasting Exchange Rates with Commodity Convenience Yields
Can macroeconomists get rich forecasting exchange rates?
Forecasting exchange rates with a large Bayesian VAR
Forecasting sectoral trade growth under flexible exchange rates
Forecasting sectoral trade growth under flexible exchange rates
Adaptive forecasting of exchange rates with panel data
Exchange rate forecasting with advanced machine learning methods
Intraday foreign exchange rate forecasting using sparse grids
Exchange rate forecasting on a napkin
Selective Attention in Exchange Rate Forecasting
Exchange rate forecasting with DSGE models
Selective Attention in Exchange Rate Forecasting
Forecasting Exchange Rates with Commodity Convenience Yields
Can macroeconomists get rich forecasting exchange rates?
Forecasting exchange rates with a large Bayesian VAR
Forecasting sectoral trade growth under flexible exchange rates
Forecasting sectoral trade growth under flexible exchange rates
Adaptive forecasting of exchange rates with panel data
Exchange rate forecasting with advanced machine learning methods