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The role of heterogeneous expectations in forward exchange market created by Xiaoping Li, Chunyang Zhou and Chongfeng Wu

By: Contributor(s): Material type: TextTextSeries: Applied economics letters ; Volume 20, number 5New York: Taylor & Francis, 2013Content type:
  • text
Media type:
  • unmediated
Carrier type:
  • volume
ISSN:
  • 13504851
Subject(s): LOC classification:
  • HB1.A666 APP
Online resources: Abstract: We build a Markov regime switching model to examine the role of heterogeneous expectations in the forward exchange market, where the regime could be fundamentalists or chartists. Our empirical analysis of EUR/USD and USD/JPY forward markets suggest that the fundamen-talists who follow negative feedback rule provide a mean-reverting dynamics into the market, while the chartists who follow positive feedback rule would reinforce the forward exchange rate movement. Finally, we find the chartists tend to switch to fundamentalists when the forward rate deviates away from its equilibrium.
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Holdings
Item type Current library Call number Vol info Copy number Status Notes Date due Barcode
Journal Article Journal Article Main Library - Special Collections HB1.A666 APP (Browse shelf(Opens below)) Vol. 20, no. 5 (pages 471-475) SP17976 Not for loan For In House Use Only

We build a Markov regime switching model to examine the role of heterogeneous expectations in the forward exchange market, where the regime could be fundamentalists or chartists. Our empirical analysis of EUR/USD and USD/JPY forward markets suggest that the fundamen-talists who follow negative feedback rule provide a mean-reverting dynamics into the market, while the chartists who follow positive feedback rule would reinforce the forward exchange rate movement. Finally, we find the chartists tend to switch to fundamentalists when the forward rate deviates away from its equilibrium.

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