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86. If the exchange rate follows a random walkA. The future exchange rate is unpredictableB.The future exchange rate is expected to be the same as the current exchange rate, St= E(St+1)C. The best predictor of future exchange rates is the forward rate Ft= E(St+1|It)D. b) and c)c) is wrong because the forward rate model is distinct from the random walk model87. One implication of the random walk hypothesis is 88. The random walk hypothesis suggests that: the forward rate model is distinct from the random walk model. Tough question89. With regard to fundamental forecasting versus technical forecasting of exchange rates 6-58
Chapter 06 International Parity Relationships and Forecasting Foreign Exchange90. Generating exchange rate forecasts with the fundamental approach involves A. Looking at charts of the exchange rate and extrapolating the patterns into the futureB. Estimation of a structural modelC. Substituting the estimated values of the independent variables into the estimated structural model to generate the forecastD.b) and c)91. Which of the following issues are difficulties for the fundamental approach to exchange rate forecasting?