Evaluating predictive performance of judgemental extrapolations from simulated currency series
Pollock, A. C.
Onkal Atay, D.
Wilkie Thomson, M. E.
European Journal of Operational Research
Pollock, A. C., Macaulay, A., Önkal-Atay, D., & Wilkie-Thomson, M. E. (1999). Evaluating predictive performance of judgemental extrapolations from simulated currency series. European journal of operational research, 114(2), 281-293.
Please cite this item using this persistent URLhttp://hdl.handle.net/11693/10979
Judgemental forecasting of exchange rates is critical for ®nancial decision-making. Detailed investigations of the potential e ects of time-series characteristics on judgemental currency forecasts demand the use of simulated series where the form of the signal and probability distribution of noise are known. The accuracy measures Mean Absolute Error (MAE) and Mean Squared Error (MSE) are frequently applied quantities in assessing judgemental predictive performance on actual exchange rate data. This paper illustrates that, in applying these measures to simulated series with Normally distributed noise, it may be desirable to use their expected values after standardising the noise variance. A method of calculating the expected values for the MAE and MSE is set out, and an application to ®nancial experts' judgemental currency forecasts is presented. Ó 1999 Elsevier Science B.V. All rights reserved.
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