Exchange Rate Predictability in Finite Samples

Hsiu-Hsin Ko
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Hsiu-Hsin Ko: National University of Kaohsiung

The Japanese Economic Review, 2016, vol. 67, issue 3, No 7, 378 pages

Abstract: Abstract The goal of the present study is to re-examine the exchange rate predictability with an approach that accounts for the negative effect of the finite-sample estimation error on forecast accuracy in the in-sample test. We consider various exchange rate models and find that despite the presence of significant population-level predictive content in the exchange rate model, the coefficients of the predictive variables could be small enough that, with the available sample, they are estimated so imprecisely that a random walk model can be expected to forecast at least as well as the exchange rate model.

Keywords: F31; F37 (search for similar items in EconPapers)
Date: 2016
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DOI: 10.1111/jere.12097

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