Adaptive Forecasting Of Exchange Rates With Panel Data
This paper investigates the statistical and economic implications of adaptive forecasting of exchange rates with panel data and alternative predictors. The candidate exchange rate predictors are drawn from macroeconomic 'Fundamentals', return/volatility of asset markets and cyclical and confidence indices. Exchange rate forecasts at various horizons are obtained from each of the potential predictors using single market, mean group and pooled estimates by means of rolling window and recursive forecasting schemes. The capabilities of single predictors and of adaptive techniques for combining the generated exchange rate forecasts are subsequently examined by means of statistical and economic performance measures.