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

Yoichi Tsuchiya

doi:10.1016/j.iref.2015.04.010

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

Yoichi Tsuchiya

Research output: Contribution to journal › Article › peer-review

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 language	English
Pages (from-to)	266-276
Number of pages	11
Journal	International Review of Economics and Finance
Volume	39
DOIs	https://doi.org/10.1016/j.iref.2015.04.010
Publication status	Published - 2015 Sep 1
Externally published	Yes

Keywords

Asymmetric loss
Central bank intervention
Financial crisis
Herding
Monetary policy

ASJC Scopus subject areas

Finance
Economics and Econometrics

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AB - 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.

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KW - Monetary policy

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

Abstract

Keywords

ASJC Scopus subject areas

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