Please use this identifier to cite or link to this item: http://hdl.handle.net/10419/161663
Authors: 
Crespo Cuaresma, Jesus
Fortin, Ines
Hlouskova, Jaroslava
Year of Publication: 
2017
Series/Report no.: 
Reihe Ökonomie / Economics Series, Institut für Höhere Studien (IHS) 326
Abstract: 
We examine the potential gains of using exchange rate forecast models and forecast com- bination methods in the management of currency portfolios for three exchange rates, the euro (EUR) versus the US dollar (USD), the British pound (GBP) and the Japanese yen (JPY). We use a battery of econometric specifications to evaluate whether optimal currency portfolios implied by trading strategies based on exchange rate forecasts out- perform single-currency and the equally weighted portfolio. We assess the differences in profitability of optimal currency portfolios for different types of investor preferences, different trading strategies, different composite forecasts and different forecast horizons. Our results indicate that the benefits of integrating exchange rate forecasts from state-of-the-art econometric models in currency portfolios are sensitive to the trading strategy under consideration and vary strongly across prediction horizons.
Subjects: 
currency portfolios
exchange rate forecasting
trading strategies
profitability
JEL: 
G02
G11
E20
Document Type: 
Working Paper

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