A directional evaluation of corporate executives' exchange rate forecasts

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Abstract

We investigate the directional accuracy of exchange rate forecasts by corporate executives. We find that a forecast with a 1-year horizon is valuable for the profitability and unprofitability predictions of manufacturers, although previous studies provide considerable evidence that forecasts with horizons of 1 year and longer are not valuable. However, a forecast is not valuable in predicting an appreciation or depreciation of the exchange rate. Our findings suggest that corporate executives are more concerned about and focused on the impact of the exchange rate on their profitability, rather than the exchange rate itself.

Original languageEnglish
Pages (from-to)95-101
Number of pages7
JournalApplied Economics
Volume46
Issue number1
DOIs
Publication statusPublished - 2014 Jan

Keywords

  • directional analysis
  • forecast evaluation
  • macroeconomic forecast
  • market-timing test

ASJC Scopus subject areas

  • Economics and Econometrics

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