The random walk versus unbiased efficiency: can we separate the wheat from the chaff?

Imad A. Moosa

Journal of Post Keynesian Economics, 2015, vol. 38, issue 2, 251-279

Abstract: In the issue under investigation the wheat cannot be separated from the chaff because all we have is chaff. The random walk and unbiased efficiency are equally bad forecasters that should not be used as benchmarks for measuring forecasting accuracy. The simulation and econometric results show that when two forecasters are not independent they produce forecasts of similar quality, in which case it is erroneous to use the forward rate as a forecaster and the spot rate as a benchmark. Theoretical and intuitive explanations are presented for why the random walk and unbiased efficiency produce poor-quality forecasts that are almost identical. The failure of unbiased efficiency is explained primarily in terms of the post Keynesian view of the forward exchange rate.

Date: 2015
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (1)

Downloads: (external link)
http://hdl.handle.net/10.1080/01603477.2015.1078734 (text/html)
Access to full text is restricted to subscribers.

Related works:
This item may be available elsewhere in EconPapers: Search for items with the same title.

Export reference: BibTeX RIS (EndNote, ProCite, RefMan) HTML/Text

Persistent link: https://EconPapers.repec.org/RePEc:mes:postke:v:38:y:2015:i:2:p:251-279

Ordering information: This journal article can be ordered from
http://www.tandfonline.com/pricing/journal/MPKE20

DOI: 10.1080/01603477.2015.1078734

Access Statistics for this article

More articles in Journal of Post Keynesian Economics from Taylor & Francis Journals
Bibliographic data for series maintained by Chris Longhurst ().