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Forecasting the Dollar/British Pound Exchange Rate: Asymmetric Loss and Forecast Rationality

Author

Listed:
  • Christian Pierdzioch

    (Helmut Schmidt University)

  • Jan C Rülke

    (WHU -- Otto Beisheim School of Management)

  • Georg Stadtmann

    (University of Southern Denmark and European-University Viadrina Frankfurt (Oder))

Abstract

We apply an approach recently developed by Elliott et al. (Rev. Ec. Studies. 72, 1197-1125, 2005) to study whether forecasts of the dollar/British pound exchange rate extracted from a panel of survey data are consistent with an asymmetric loss function. We find that only few forecasters seem to form forecasts under an asymmetric loss function. Accounting for the asymmetry of their loss function, however, often makes their forecasts look rational.

Suggested Citation

  • Christian Pierdzioch & Jan C Rülke & Georg Stadtmann, 2012. "Forecasting the Dollar/British Pound Exchange Rate: Asymmetric Loss and Forecast Rationality," Economics Bulletin, AccessEcon, vol. 32(3), pages 213-213.
    • Handle: RePEc:ebl:ecbull:eb-11-00862
    as

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    References listed on IDEAS

    as
    1. Graham Elliott & Allan Timmermann & Ivana Komunjer, 2005. "Estimation and Testing of Forecast Rationality under Flexible Loss," The Review of Economic Studies, Review of Economic Studies Ltd, vol. 72(4), pages 1107-1125.
    2. Auffhammer, Maximilian, 2007. "The rationality of EIA forecasts under symmetric and asymmetric loss," Resource and Energy Economics, Elsevier, vol. 29(2), pages 102-121, May.
    3. Graham Elliott & Ivana Komunjer & Allan Timmermann, 2008. "Biases in Macroeconomic Forecasts: Irrationality or Asymmetric Loss?," Journal of the European Economic Association, MIT Press, vol. 6(1), pages 122-157, March.
    4. G. A. Christodoulakis & E. C. Mamatzakis, 2009. "Assessing the prudence of economic forecasts in the EU," Journal of Applied Econometrics, John Wiley & Sons, Ltd., vol. 24(4), pages 583-606.
    5. George Christodoulakis & Emmanuel Mamatzakis, 2008. "Asymmetries in the sport-forward G10 exchange rates: an answer to an old puzzle?," Discussion Paper Series 2008_12, Department of Economics, University of Macedonia, revised Sep 2008.
    Full references (including those not matched with items on IDEAS)

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    More about this item

    Keywords

    Exchange rate; Forecasting; Loss function;
    All these keywords.

    JEL classification:

    • F3 - International Economics - - International Finance
    • F0 - International Economics - - General

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