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Linear and Non-linear (Non-)Forecastability of High-frequency Exchange Rates

✍ Scribed by CHRIS BROOKS

Publisher
John Wiley and Sons
Year
1997
Tongue
English
Weight
222 KB
Volume
16
Category
Article
ISSN
0277-6693

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✦ Synopsis

This paper forecasts Daily Sterling exchange rate returns using various naive, linear and non-linear univariate time-series models. The accuracy of the forecasts is evaluated using mean squared error and sign prediction criteria. These show only a very modest improvement over forecasts generated by a random walk model. The Pesaran±Timmerman test and a comparison with forecasts generated arti®cially shows that even the best models have no evidence of market timing ability.

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