Herding behavior and loss functions of exchange rate forecasters over interventions and financial crises

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12 Citations (Scopus)

Abstract

This study examines herding behaviors of yen/dollar exchange rate forecasters, focusing on whether their behaviors are time-varying. The empirical results show that interventions amplified herding for a one-month horizon. During the recent financial crises, herding was pronounced for the one-month forecast horizon, and anti-herding, for a one-year horizon. Quantitative Easing 1 (QE1) also saw pronounced anti-herding for one-month and one-year horizons. Their loss functions are also evaluated under a possibly asymmetric loss function. The degree and direction of asymmetry are time-varying, and their variations differ among forecasters. The results are broadly consistent with (anti-) herding and its time-varying feature.

Original languageEnglish
Pages (from-to)266-276
Number of pages11
JournalInternational Review of Economics and Finance
Volume39
DOIs
Publication statusPublished - 2015 Sep 1
Externally publishedYes

Keywords

  • Asymmetric loss
  • Central bank intervention
  • Financial crisis
  • Herding
  • Monetary policy

ASJC Scopus subject areas

  • Finance
  • Economics and Econometrics

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