Skewed exchange-rate forecasts

Christian Pierdzioch and Georg Stadtmann

The European Journal of Finance, 2015, vol. 21, issue 13-14, 1161-1175

Abstract: We used survey data on exchange-rate forecasts of the dollar/euro exchange rate and the yen/dollar exchange rate to analyze the correlation of the skewness of the distribution of heterogeneous forecasts with movements of the exchange rate. Using various measures of skewness, we found a negative correlation of skewness of 1-month-ahead forecasts with exchange-rate movements. In contrast, the correlation of skewness of 12-months-ahead forecast with exchange-rate movements is positive. The negative correlation arising in the case of 1-month-ahead forecasts is consistent with expected mean reversion in exchange rates. The positive correlation arising in the case of longer term forecasts, in turn, is consistent with longer term bandwagon effects.

Date: 2015
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DOI: 10.1080/1351847X.2012.671777

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