Abstract
The paper aims to analyze the decision making based on expert polls for short-term foreign exchange (FX) forecasting from the viewpoint of the economic behavior theory. The paper offers the assessment of the problem of decision making for forecasting and investment into foreign currency. This study analyzes the relative accuracy of expert polls and forecasts, based on historical data, in the prediction of the most liquid currency pairs (EUR/USD, USD/JPY, GBP/USD) as well as USD/RUB currency pair on time horizons 1, 2, 6, and 12 months. Observation period lasted from January 2018 to January 2019. For EUR/USD (56-62 experts), the polls were more accurate than historical simulations. For GBP/USD (28-70 experts), historical simulations were more accurate than polls. For USD/JPY and USD/RUB, historical simulations are better earlier, while polls are slightly better later. The main conclusion is that EUR/USD historical modeling is usually less accurate on the horizon more than half a year as compared with expert polls for making the decisions about the future exchange rate.
Highlights
Many market participants are interested in being able to predict further exchange rate direction
The paper aims to analyze the decision making based on expert polls for short-term foreign exchange (FX) forecasting from the viewpoint of the economic behavior theory
The main conclusion is that EUR/USD historical modeling is usually less accurate on the horizon more than half a year as compared with expert polls for making the decisions about the future exchange rate
Summary
Many market participants are interested in being able to predict further exchange rate direction. The paper aims to analyze the decision making based on expert polls for short-term foreign exchange (FX) forecasting from the viewpoint of the economic behavior theory. This study analyzes the relative accuracy of expert polls and forecasts, based on historical data, in the prediction of the most liquid currency pairs (EUR/USD, USD/JPY, GBP/USD) as well as USD/RUB currency pair on time horizons 1, 2, 6, and 12 months.
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