Are Foreign Exchange Forecasts Rational? New Evidence From Survey Data
Kathryn M.E. Dominguez
Abstract
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Kathryn M.E. Dominguez
Abstract
Open-access reader
Tests of rational expectations in foreign exchange markets have been inconclusive because of disagreement over the underlying asset pricing model. This paper uses a newly available set of data on foreign exchange forecasts to examine directly expectations formation in four foreign currency markets. Generally, results do not support the simple rational expectations hypothesis.
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Tests of rational expectations in foreign exchange markets have been inconclusive because of disagreement over the underlying asset pricing model. This paper uses a newly available set of data on foreign exchange forecasts to examine directly expectations formation in four foreign currency markets. Generally, results do not support the simple rational expectations hypothesis.
Key concepts: Rational expectations, Foreign exchange, Currency, Foreign exchange market, Economics, Financial economics, Asset (computer security), Monetary economics