Forecasting the Brazilian real and the Mexican peso: Asymmetric loss, forecast rationality, and forecaster herding

Georg Stadtmann, Ulrich Fritsche, Christian Pierdzioch, Jan-Christoph Rülke

Research output: Contribution to journalJournal articleResearchpeer-review

Abstract

Using forecasts of exchange rates of the Brazilian real and the Mexican peso against the US dollar, we analyze the symmetry of the loss function of exchange-rate forecasters and the rationality of their forecasts. Symmetry of the loss function can be rejected for some forecasters but not all. Even when allowing for asymmetric loss functions, the predictions of some forecasters do not fit the traditional definition of rational forecasts. We interpret our results in terms of recent research on forecaster (anti-)herding.
Original languageEnglish
JournalInternational Journal of Forecasting
Volume31
Issue number1
Pages (from-to)130-139
Number of pages10
ISSN0169-2070
DOIs
Publication statusPublished - 2015

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