Please use this identifier to cite or link to this item: http://hdl.handle.net/10419/48465
Authors: 
Bofinger, Peter
Schmidt, Robert
Year of Publication: 
2003
Series/Report no.: 
Würzburg economic papers 38
Abstract: 
The study analyses the characteristics of professional exchange rate forecasts for the €/US-$ rate. The results indicate that the quality of forecasts produced by profes-sional economists is rather poor and incompatible with the rational expectations hy-pothesis. This dismal result is according to our analysis attributed to the fact that professional forecasts are to a large extend influenced by actual changes in exchange rates. A reasonable explanation for this behaviour can be derived from the behav-ioural finance literature. According to the anchoring heuristic decision processes are often dominated by available pieces of information even if they are obviously of no relevance.
Subjects: 
foreign exchange market
rational expectations
forecasts
behavioural finance
anchoring heuristics
JEL: 
F31
F47
G12
G15
Document Type: 
Working Paper

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