Random Walk or Bandwagon: Some Evidence From Foreign Exchanges in the 1980s

Lai, Kon S.; Pauly, Peter

doi:10.1080/00036849200000037

Cited by 8 publications

(4 citation statements)

References 19 publications

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“…Similar arguments in FX markets have motivated claims that FX rates follow random walks, implying that it would be quite difficult for anybody to make rate predictions at above-chance accuracy levels (e.g., Mussa, 1979). But findings contradicting the random-walk view have also been reported (e.g., Lai & Pauly, 1992), along with various models predicting forecasting performance consistent with those reports (e.g., Sarantis & Stewart, 1995). Thus, a priori, it is by no means obvious what accuracy expectations ought to be.…”

mentioning

confidence: 83%

Professional vs. amateur judgment accuracy: The case of foreign exchange rates

Önkal

Yates

Şımga-Muğan

et al. 2003

Organizational Behavior and Human Decision Processes

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Highly knowledgeable people often fail to achieve highly accurate judgments, a phenomenon sometimes called the ''processperformance paradox.'' The present research tested for this paradox in foreign exchange (FX) rate forecasting. Forty professional and 57 sophisticated amateur forecasters made one-day and one-week-ahead FX predictions in deterministic and probabilistic formats. Among the conclusions indicated by the results are: (a) professional accuracy usually surpasses amateur accuracy, although many amateurs outperform many professionals; (b) professionals appear to achieve high proficiency via heavy reliance on predictive information (unlike what has been observed before, e.g., for stock prices); (c) forecast format strongly affects judgment accuracy and processes; and (d) apparent overconfidence can transform itself into underconfidence depending on when and how forecasters must articulate their confidence.

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mentioning

confidence: 83%

Professional vs. amateur judgment accuracy: The case of foreign exchange rates

Önkal

Yates

Şımga-Muğan

et al. 2003

Organizational Behavior and Human Decision Processes

View full text Add to dashboard Cite

show abstract

“…See also Lai and Pauly (1992). In contrast, using a shorter sample Taylor and Allen (1990) fail to reject a static null hypothesis against any particular alternative for four of six individual forecasters.…”

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confidence: 99%

Currency traders and exchange rate dynamics: a survey of the US market

Cheung

Chinn

2001

Journal of International Money and Finance

436

299

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We report findings from a survey of United States foreign exchange traders. Our results indicate that: (i) in recent years electronically-brokered transactions have risen substantially, mostly at the expense of traditional brokers; (ii) the market norm is an important determinant of interbank bid-ask spread and the most widely-cited reason for deviating from the conventional bid-ask spread is a thin/hectic market; (iii) half or more of market respondents believe that large players dominate in the dollar-pound and dollar-Swiss franc markets; (iv) technical trading best characterizes about 30% of traders, with this proportion rising from five years ago; (v) news about macroeconomic variables is rapidly incorporated into exchange rates; (vi) the importance of individual macroeconomic variables shifts over time, although interest rates always appear to be important; (vii) economic fundamentals are perceived to be more important at longer horizons, while short-run deviations from the fundamentals are attributed to excess speculation and institutional customer/hedge fund manipulation; (viii) speculation is generally viewed positively, as enhancing market efficiency and liquidity, even though it exacerbates volatility; (ix) central bank intervention does not appear to have substantial effect, although there is general agreement that it increases volatility, and finally; (x) traders do not view purchasing power parity as a useful concept, even though a significant proportion (40%) believe that it affects exchange rates at horizons of over six months.

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“…17 See also Lai and Pauly (1992). In contrast, using a shorter sample Taylor and Allen (1990) fail to reject a static null hypothesis against any particular alternative for four of six individual forecasters.…”

Section: What Matters and When Does It Matter?mentioning

confidence: 97%