Heterogeneous expectations, exchange rate dynamics and predictability

S Manzan, FH Westerhoff - Journal of economic behavior & Organization, 2007 - Elsevier
This paper proposes a simple chartist-fundamentalist model in which we allow for nonlinear
time variation in chartists' extrapolation rate. Estimation of the model using monthly data for
the major currencies vis-a-vis the US dollar shows that the model is significant in-sample
and that it has out-of-sample predictive power for some of the currencies. We investigate the
power of tests of the random walk model to detect predictability against the alternative of the
proposed model. We find that the evidence of short-term unpredictability and the long-term …

[引用][C] Heterogeneous expectations, exchange rate dynamics and predictability

S Manzan, F Westerhoff - 2002 - ideas.repec.org
… Why is it so difficult to beat the random walk forecast of exchange rates?," Journal of
International Economics, Elsevier, vol. 60(1), pages 85-107, May. … Why is it so difficult to beat
the random walk forecast of exchange rates?," Working Paper Series 88, European Central
Bank. … Empirical exchange rate models of the nineties: Are any fit to survive?," Journal
of International Money and Finance, Elsevier, vol. 24(7), pages 1150-1175, November. …
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