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Answer: Directional forecasting ability in the foreign exchange market is not particularly
useful if the forecasts are to be used in speculative strategies. To this end, it would have been
more useful to know whether the forecasting firms were on the correct side of the forward
rate. Ideally, a full record of forecasts would be obtained. Then, accuracy statistics (like the
RMSE) and profitability statistics (like the Sharpe ratio) could be computed....
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