Can exchange rate models outperform the random walk? Magnitude, direction and profitability as criteria - I modelli di tasso cambio possono battere la “random walk”? Grandezza, direzione e profittabilità come criteri di comparazione

EImad A. Moosa () and Kelly Burns ()
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EImad A. Moosa: RMIT University School of Economics, Finance and Marketing, Postal: Building 108 Level 12, 239 Bourke Street Melbourne 3000 Victoria, Australia, http://www.rmit.edu.au
Kelly Burns: RMIT University School of Economics, Finance and Marketing, Postal: Building 108 Level 12, 239 Bourke Street Melbourne 3000 Victoria, Australia, http://www.rmit.edu.au

Economia Internazionale / International Economics, 2012, vol. 65, issue 3, 473-490

Abstract: While many explanations have been put forward for the failure of exchange rate models to outperform the random walk in out-of-sample forecasting, a simple explanation is the use of measures of forecasting accuracy that depend entirely on the magnitude of the forecasting error. By using simulated data representing the forecasts of eight models, it is demonstrated that the random walk can be outperformed if forecasting power is judged by measures of direction accuracy, by adjusting the root mean square error to take into account direction accuracy, and by using the risk-adjusted return obtained from a trading strategy based on the forecasts. - Sono state proposte diverse spiegazioni della incapacità dei modelli di previsione dei tassi di cambio di battere la random walk. Qui si avanza l’ipotesi di considerare come unica metodologia valida di comparazione la dimensione dell’errore di previsione. Utilizzando le previsioni di otto modelli si dimostra che la random walk può essere superata se la capacità di previsione è valutata attraverso misure di accuratezza direzionale, tramite lo scarto quadratico medio dell’errore e il risk-adjusted return ottenuto da una strategia di trading basata sulle previsioni.

Keywords: Direction Accuracy; Exchange Rate Models; Forecasting Random Walk (search for similar items in EconPapers)
JEL-codes: C53 F31 F37 (search for similar items in EconPapers)
Date: 2012
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