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Forecasting the Euro: Do Forecasters Have an Asymmetric Loss Function?

Author

Listed:
  • Ulrich Fritsche

    (Department for Socioeconomics, Department for Economics, University of Hamburg)

  • Christian Pierdzioch

    (Helmut-Schmidt-University, Department of Economics)

  • Jan-Christoph Ruelke

    (WHU – Otto Beisheim School of Management)

  • Georg Stadtmann

    (University of Southern Denmark, Department of Business and Economics, and European-University Viadrina)

Abstract

Based on the approach advanced by Elliott et al. (Rev. Ec. Studies. 72, 1197-1125,2005), we analyzed whether the loss function of a sample of exchange rate forecasters is asymmetric in the forecast error. Using forecasts of the euro/dollar exchange rate, we found that the shape of the loss function varies across forecasters. Our empirical results suggest that it is important to account for the heterogeneity of exchange rate forecasts at the microeconomic level of individual forecasters when one seeks to analyze whether forecasters form exchange rate forecasts under an asymmetric loss function.

Suggested Citation

  • Ulrich Fritsche & Christian Pierdzioch & Jan-Christoph Ruelke & Georg Stadtmann, 2012. "Forecasting the Euro: Do Forecasters Have an Asymmetric Loss Function?," Macroeconomics and Finance Series 201201, University of Hamburg, Department of Socioeconomics.
    • Handle: RePEc:hep:macppr:201201
    as

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    File URL: https://www.wiso.uni-hamburg.de/repec/hepdoc/macppr_1_2012.pdf
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    References listed on IDEAS

    as
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    4. Boero, Gianna & Smith, Jeremy & Wallis, Kenneth F., 2008. "Evaluating a three-dimensional panel of point forecasts: The Bank of England Survey of External Forecasters," International Journal of Forecasting, Elsevier, vol. 24(3), pages 354-367.
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    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:

    • F31 - International Economics - - International Finance - - - Foreign Exchange
    • D84 - Microeconomics - - Information, Knowledge, and Uncertainty - - - Expectations; Speculations

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