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Chartists and Fundamentalists in the Currency Market and the Volatility of Exchange Rates: First Results

Author

Listed:
  • Bask, Mikael

    (Department of Economics, Umeå University)

Abstract

It is shown in this letter that the magnitude of exchange rate overshooting is larger than in Dornbusch (1976) when chartists are introduced into the model. Also, the extent of overshooting depends inversely on the planning horizon. The latter follows from explicitly modelling the empirical observation that, for shorter planning horizons, more weight is placed on technical analysis, while more weight is placed on fundamental analysis for longer planning horizons.

Suggested Citation

  • Bask, Mikael, 2002. "Chartists and Fundamentalists in the Currency Market and the Volatility of Exchange Rates: First Results," Umeå Economic Studies 594, Umeå University, Department of Economics.
    • Handle: RePEc:hhs:umnees:0594
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    More about this item

    Keywords

    Foreign Exchange; Fundamental Analysis; Overshooting; Technical Analysis;
    All these keywords.

    JEL classification:

    • F31 - International Economics - - International Finance - - - Foreign Exchange

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