Performance evaluation of judgemental directional exchange rate predictions

Date
2005
Authors
Pollock, A. C.
Macaulay, A.
Thomson, M. E.
Önkal, D.
Advisor
Supervisor
Co-Advisor
Co-Supervisor
Instructor
Source Title
International Journal of Forecasting
Print ISSN
0169-2070
Electronic ISSN
1872-8200
Publisher
Elsevier
Volume
21
Issue
3
Pages
473 - 489
Language
English
Type
Article
Journal Title
Journal ISSN
Volume Title
Series
Abstract

A procedure is proposed for examining different aspects of performance for judgemental directional probability predictions of exchange rate movements. In particular, a range of new predictive performance measures is identified to highlight specific expressions of strengths and weaknesses in judgemental directional forecasts. Proposed performance qualifiers extend the existing accuracy measures, enabling detailed comparisons of probability forecasts with ex-post empirical probabilities that are derived from changes in the logarithms of the series. This provides a multi-faceted evaluation that is straightforward for practitioners to implement, while affording the flexibility of being used in situations where the time intervals between the predictions have variable lengths. The proposed procedure is illustrated via an application to a set of directional probability exchange rate forecasts for the US Dollar/Swiss Franc from 23/7/96 to 7/12/99 and the findings are discussed.

Course
Other identifiers
Book Title
Keywords
Accuracy, Exchange rate, Forecasting, Judgement, Probability
Citation
Published Version (Please cite this version)