Quotation Crespo Cuaresma, Jesus, Hlouskova, Jaroslava, Fortin, Ines. 2018. Exchange rate forecasting and the performance of currency portfolios. Journal of Forecasting. 37 519-540.


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Abstract

We examine the potential gains of using exchange rate forecast models and forecast combination methods in the management of currency portfolios for three exchange rates: the euro versus the US dollar, the British pound, and the Japanese yen. We use a battery of econometric specifications to evaluate whether optimal currency portfolios implied by trading strategies based on exchange rate forecasts outperform single currencies and the equally weighted portfolio. We assess the differences in profitability of optimal currency portfolios for different types of investor preferences, two trading strategies, mean squared error‐based composite forecasts, and different forecast horizons. Our results indicate that there are clear benefits of integrating exchange rate forecasts from state‐of‐the‐art econometric models in currency portfolios. These benefits vary across investor preferences and prediction horizons but are rather similar across trading strategies.

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Publication's profile

Status of publication Published
Affiliation WU
Type of publication Journal article
Journal Journal of Forecasting
Citation Index SSCI
WU Journalrating 2009 A
WU-Journal-Rating new FIN-A, INF-A, MAR-B, STRAT-B, VW-D, WH-B
Language English
Title Exchange rate forecasting and the performance of currency portfolios
Volume 37
Year 2018
Page from 519
Page to 540
Reviewed? Y
DOI http://dx.doi.org/10.1002/for.2518
Open Access Y
Open Access Link https://onlinelibrary.wiley.com/doi/full/10.1002/for.2518

Associations

People
Crespo Cuaresma, Jesus (Details)
External
Fortin, Ines (IHS, Austria)
Hlouskova, Jaroslava (IHS, Austria)
Organization
Institute for Macroeconomics IN (Details)
Research Institute for Human Capital and Development FI (Details)
Competence Center for Sustainability Transformation and Responsibility WE (Details)
Research Institute for Cryptoeconomics FI (Details)
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