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Title:Exchange rate expectations of chartists and fundamentalists PDF Logo
Authors:Dick, Christian D.
Menkhoff, Lukas
Issue Date:2012
Series/Report no.:ZEW Discussion Papers 12-026
Abstract:This paper provides novel evidence on exchange rate expectations of both chartists and fundamentalists separately. These groups indeed form expectations differently. Chartists change their expectations more often; however, all professionals' expectations vary considerably as they generally follow strong exchange rate trends. In line with non-linear exchange rate-modeling, professionals expect mean reversion only if exchange rates deviate much from PPP. Chartists survive in FX markets as they forecast equally accurately as fundamentalists. Unexpected from an efficient market viewpoint, chartists even outperform fundamentalists at short horizons. Overall, these findings clearly support the chartist-fundamentalist approach.
Subjects:exchange rate formation
expectation formation
heterogeneous agent models
forecasting performance
JEL:F31
G15
D84
Persistent Identifier of the first edition:urn:nbn:de:bsz:180-madoc-322360
Document Type:Working Paper
Appears in Collections:ZEW Discussion Papers
Publikationen von Forscherinnen und Forschern des ZEW

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