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Two currencies, one model? Evidence from the Wall Street Journal forecast poll

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  • Frenkel, Michael
  • Rülke, Jan-Christoph
  • Stadtmann, Georg

Abstract

We use the foreign exchange forecasts of the Wall Street Journal (WSJ) poll to analyze the expectation formation process of forecasters for the exchange rates of the euro and the yen vis-à-vis the U.S. dollar for the period 1999-2005. We also compare the expectation formation process with the actual exchange rate process. We find that most forecasters have contrarian exchange rate expectations, but our results also indicate significant heterogeneity between forecasters. While the actual exchange rate process of the yen/dollar exchange rate shows negative autocorrelation, the dollar/euro exchange rate exhibits positive autocorrelation.

Suggested Citation

  • Frenkel, Michael & Rülke, Jan-Christoph & Stadtmann, Georg, 2009. "Two currencies, one model? Evidence from the Wall Street Journal forecast poll," Journal of International Financial Markets, Institutions and Money, Elsevier, vol. 19(4), pages 588-596, October.
    • Handle: RePEc:eee:intfin:v:19:y:2009:i:4:p:588-596
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    Cited by:

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    3. Cifarelli, Giulio & Paladino, Giovanna, 2018. "Can the interaction between a single long-term attractor and heterogeneous trading explain exchange rate behaviour? A nonlinear econometric investigation," MPRA Paper 83894, University Library of Munich, Germany.
    4. Cifarelli, Giulio & Paladino, Giovanna, 2018. "Can the interaction between a single long-term attractor and heterogeneous trading explain the exchange rate conundrum?," Research in International Business and Finance, Elsevier, vol. 46(C), pages 313-323.
    5. Chortareas, Georgios & Jitmaneeroj, Boonlert & Wood, Andrew, 2012. "Forecast rationality and monetary policy frameworks: Evidence from UK interest rate forecasts," Journal of International Financial Markets, Institutions and Money, Elsevier, vol. 22(1), pages 209-231.
    6. Frederik Kunze, 2020. "Predicting exchange rates in Asia: New insights on the accuracy of survey forecasts," Journal of Forecasting, John Wiley & Sons, Ltd., vol. 39(2), pages 313-333, March.
    7. Michael Frenkel & Matthias Mauch & Jan-Christoph Rülke, 2017. "Forecaster Rationality and Expectation Formation in Foreign Exchange Markets: Do Emerging Markets Differ from Industrialized Economies?," WHU Working Paper Series - Economics Group 17-04, WHU - Otto Beisheim School of Management.
    8. Kunze, Frederik, 2017. "Predicting exchange rates in Asia: New insights on the accuracy of survey forecasts," University of Göttingen Working Papers in Economics 326, University of Goettingen, Department of Economics.
    9. Lee A. Smales, 2022. "The influence of policy uncertainty on exchange rate forecasting," Journal of Forecasting, John Wiley & Sons, Ltd., vol. 41(5), pages 997-1016, August.

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