Can we beat the Random Walk? The case of survey-based exchange rate forecasts in Chile

Pablo Pincheira and Federico Neumann

MPRA Paper from University Library of Munich, Germany

Abstract: We examine the accuracy of survey-based expectations of the Chilean exchange rate relative to the US dollar. Our out-of-sample analysis reveals that survey-based forecasts outperform the Driftless Random Walk (DRW) in terms of Mean Squared Prediction Error at several forecasting horizons. This result holds true even when comparing the survey to a more competitive benchmark based on a refined information set. A similar result is found when precision is measured in terms of Directional Accuracy: survey-based forecasts outperform a “pure luck” benchmark at several forecasting horizons. Differing from the traditional “no predictability” result reported in the literature for many exchange rates, our findings suggest that the Chilean peso is indeed predictable.

Keywords: Survey expectations; Exchange Rates; Forecasting; Random Walk; Directional Accuracy; Mean Squared Prediction Error. (search for similar items in EconPapers)
JEL-codes: C0 C00 C01 C1 C10 C12 C14 C20 C22 C52 C53 C58 D00 E0 E17 E31 E37 E43 E44 E47 E50 E52 E58 F00 F31 F32 F37 F41 F47 G00 G12 G17 (search for similar items in EconPapers)
Date: 2018-12-08
New Economics Papers: this item is included in nep-for, nep-mac and nep-ore
References: View references in EconPapers View complete reference list from CitEc
Citations:

Downloads: (external link)
https://mpra.ub.uni-muenchen.de/90432/1/MPRA_paper_90432.pdf original version (application/pdf)

Related works:
Journal Article: Can we beat the Random Walk? The case of survey-based exchange rate forecasts in Chile (2020)
This item may be available elsewhere in EconPapers: Search for items with the same title.

Export reference: BibTeX RIS (EndNote, ProCite, RefMan) HTML/Text

Persistent link: https://EconPapers.repec.org/RePEc:pra:mprapa:90432

Access Statistics for this paper

More papers in MPRA Paper from University Library of Munich, Germany Ludwigstraße 33, D-80539 Munich, Germany. Contact information at EDIRC.
Bibliographic data for series maintained by Joachim Winter ().