English, Article edition: A stochastic approach to modelling the USD/AUD exchange rate: Implications for managing foreign exchange exposure Craig Ellis; Patrick Wilson

User activity

Share to:
 
Bookmark: http://trove.nla.gov.au/version/8984
Physical Description
  • article
Language
  • English

Edition details

Title
  • A stochastic approach to modelling the USD/​AUD exchange rate: Implications for managing foreign exchange exposure
Author
  • Craig Ellis
  • Patrick Wilson
Physical Description
  • article
Notes
  • Purpose – To develop an integrated approach to forecasting spot foreign exchange rates by incorporating some principles underlying long-term dependence. Design/​methodology/​approach – The paper utilises the random-walk framework to develop a stochastic forecast model wherein the sign (positive or negative) and magnitude (strong or weak) of dependence can be separately controlled. The integrated model demonstrates superior forecast performance over a conventional random walk. Findings – Using spot log prices and log price changes (returns) for the USD/​AUD exchange rate, the initial outcomes of the study suggest that a priori knowledge of the underlying sign and magnitude of long-term dependence yields out-of-sample forecasts superior to those of a random walk model. Research limitations/​implications – Independent assessment of the contribution to forecast accuracy of controlling for the sign of dependence between successive price changes only shows little additional improvement in out-of-sample forecast performance over the random walk null. Practical implications – The findings of the study have important ramifications for managerial finance as they provide important insights on expected future currency returns with potential advantages in currency hedging and/​or timing of international capital flows. Originality/​value – The contribution of this paper is to develop an original forecast model explicitly incorporating the conceptual and theoretical characteristics of long-term dependent time series. By separating the key characteristics and modelling each individually, the contribution of each to forecast accuracy can be evaluated.
  • Foreign exchange, Stochastic processes, Time series analysis
  • RePEc:eme:ijmfpp:v:1:y:2005:i:1:p:36-48
Language
  • English
Contributed by
OAIster

Get this edition

  • Set up My libraries

    How do I set up "My libraries"?

    In order to set up a list of libraries that you have access to, you must first login or sign up. Then set up a personal list of libraries from your profile page by clicking on your user name at the top right of any screen.

  • All (1)
  • Unknown (1)
None of your libraries hold this item.
None of your libraries hold this item.
None of your libraries hold this item.
None of your libraries hold this item.
None of your libraries hold this item.
None of your libraries hold this item.
None of your libraries hold this item.
None of your libraries hold this item.

User activity


e.g. test cricket, Perth (WA), "Parkes, Henry"

Separate different tags with a comma. To include a comma in your tag, surround the tag with double quotes.

Be the first to add a tag for this edition

Be the first to add this to a list

Comments and reviews

What are comments? Add a comment

No user comments or reviews for this version

Add a comment