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Exchange Rate Predictability in Finite Samples

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  • Hsiu-Hsin Ko

    (National University of Kaohsiung)

Abstract

The goal of the present study is to re-examine the exchange rate predictability with an approach that accounts for the negative effect of the finite-sample estimation error on forecast accuracy in the in-sample test. We consider various exchange rate models and find that despite the presence of significant population-level predictive content in the exchange rate model, the coefficients of the predictive variables could be small enough that, with the available sample, they are estimated so imprecisely that a random walk model can be expected to forecast at least as well as the exchange rate model.

Suggested Citation

  • Hsiu-Hsin Ko, 2016. "Exchange Rate Predictability in Finite Samples," The Japanese Economic Review, Springer, vol. 67(3), pages 361-378, September.
    • Handle: RePEc:spr:jecrev:v:67:y:2016:i:3:d:10.1111_jere.12097
    DOI: 10.1111/jere.12097
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    References listed on IDEAS

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    More about this item

    Keywords

    F31; F37;

    JEL classification:

    • F31 - International Economics - - International Finance - - - Foreign Exchange
    • F37 - International Economics - - International Finance - - - International Finance Forecasting and Simulation: Models and Applications

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