A model of medium term exchange rate forecast in an open economy. The case of the mexican peso

Mosqueda Almanza Rubén () and Jorge Guillén ()
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Mosqueda Almanza Rubén: Tecnológico de Monterrey

Contaduría y Administración, 2014, vol. 59, issue 2, 197-225

Abstract: Keynes (1930) and Samuelson (1965) proposals open the possibility of matching predictability and efficiency, as evidenced by the seminal study by Fisher (1930). Recent findings suggest that the foreign exchange market gradually incorporates relevant information allowing the formation of prices in a rational manner but not randomly. Models of exchange rate by term based on asset valuation suggest that the inclusion of risk in the spot rate increases the degree of predictability. The results show that after incorporating an accurate measure of risk, predictability of medium term foreign exchange rate increases.

Keywords: exchange rate forecast; forex market; asset valuation; risk premium (search for similar items in EconPapers)
JEL-codes: F31 (search for similar items in EconPapers)
Date: 2014
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Persistent link: https://EconPapers.repec.org/RePEc:nax:conyad:v:59:y:2014:i:2:p:197-225

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