fin370part3week2

fin370part3week2 - Chapter Objectives -To explain how firms...

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Chapter Objectives -To explain how firms can benefit form forecasting exchange rates. -to describe the common techniques used for forecasting and -to explain how forecasting performance can be evaluated Why firms Forecast Exchange Rates -MNCs need exchange rate forecasts for their: -hedging decisions -short-term financing decisions -short-term investment decisions -capital budgeting decisions -earnings assessment and -long term financing decisions Forecasting Techniques -The numerous methods available for forecasting exchange rates can be categorized into four general groups: -technical -fundamental -market-based -mixed Technical Forecasting -Technical forecasting involves the use of historical data to predict future values eg time series model -Speculators may find the models useful for predicting day to da movements -However, since the models typically focus on the near future and rarely provide point or range estimates, they are of limited use to MNCs Fundamental Forecasting -Fundamental forecasting is based on the fundamental relationships between economic variables
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fin370part3week2 - Chapter Objectives -To explain how firms...

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