Herding behavior and loss functions of exchange rate forecasters over interventions and financial crises

Yoichi Tsuchiya

International Review of Economics & Finance, 2015, vol. 39, issue C, 266-276

Abstract: This study examines herding behaviors of yen/dollar exchange rate forecasters, focusing on whether their behaviors are time-varying. The empirical results show that interventions amplified herding for a one-month horizon. During the recent financial crises, herding was pronounced for the one-month forecast horizon, and anti-herding, for a one-year horizon. Quantitative Easing 1 (QE1) also saw pronounced anti-herding for one-month and one-year horizons. Their loss functions are also evaluated under a possibly asymmetric loss function. The degree and direction of asymmetry are time-varying, and their variations differ among forecasters. The results are broadly consistent with (anti-) herding and its time-varying feature.

Keywords: Financial crisis; Asymmetric loss; Central bank intervention; Herding; Monetary policy (search for similar items in EconPapers)
JEL-codes: D84 F31 F47 (search for similar items in EconPapers)
Date: 2015
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Citations: View citations in EconPapers (9)

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Persistent link: https://EconPapers.repec.org/RePEc:eee:reveco:v:39:y:2015:i:c:p:266-276

DOI: 10.1016/j.iref.2015.04.010

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