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Title:Should one rely on professional exchange rate forecasts: An empirical analysis of professional forecasts for the €/US-$ rate PDF Logo
Authors:Bofinger, Peter
Schmidt, Robert
Issue Date: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
Appears in Collections:W.E.P. - Würzburg Economic Papers, Lst. f. VWL, Geld u. internat. Wirtschaftsbeziehungen, Universität Würzburg

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