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An exchange rate risk experiment with multiple currencies

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  • Paul Johnson
  • James Staveley-O’Carroll

Abstract

In this article, the authors describe a classroom experiment on exchange rates appropriate for undergraduate courses in macroeconomics, international economics, and money and banking. Student teams compete by managing virtual portfolios of six foreign currencies over a period of several weeks. Trading requires a few minutes in class. Students gain an understanding of currency movements, financial risk, and portfolio management. The experiment allows for a test of the efficient markets hypothesis. A single class spreadsheet is used to record the history of trades and portfolio balances, assist in formulation of team strategy, and provide the raw data for students to analyze their performance in an end-of-semester reflection paper. Sample outcomes from classes in money and banking and international economics are discussed.

Suggested Citation

  • Paul Johnson & James Staveley-O’Carroll, 2020. "An exchange rate risk experiment with multiple currencies," The Journal of Economic Education, Taylor & Francis Journals, vol. 51(1), pages 19-30, January.
    • Handle: RePEc:taf:jeduce:v:51:y:2020:i:1:p:19-30
    DOI: 10.1080/00220485.2019.1687375
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    Cited by:

    1. Alfonso-Costillo, Antonio, 2021. "Taking risks by flying paper airplanes," MPRA Paper 108541, University Library of Munich, Germany.

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