Answer directional forecasting ability in the foreign

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Unformatted text preview: tter judgment? 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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