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Christian Pierdzioch, Jan C Rülke and Georg Stadtmann
''Forecasting the Dollar/British Pound Exchange Rate: Asymmetric Loss and Forecast Rationality''
( 2012, Vol. 32 No.3 )
We apply an approach recently developed by Elliott et al. (Rev. Ec. Studies. 72, 1197-1125, 2005) to study whether forecasts of the dollar/British pound exchange rate extracted from a panel of survey data are consistent with an asymmetric loss function. We find that only few forecasters seem to form forecasts under an asymmetric loss function. Accounting for the asymmetry of their loss function, however, often makes their forecasts look rational.
Keywords: Exchange rate; Forecasting; Loss function
JEL: F3 - International Finance: General
Manuscript Received : Dec 01 2011 Manuscript Accepted : Aug 02 2012

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