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Exchange rate forecasting model comparison: A case study in North Europe
Uppsala University, Disciplinary Domain of Humanities and Social Sciences, Faculty of Social Sciences, Department of Statistics.
2011 (English)Independent thesis Advanced level (degree of Master (Two Years)), 20 credits / 30 HE creditsStudent thesis
Abstract [en]

In the past, a lot of studies about the comparison of exchange rate forecasting models have been carried out. Most of these studies have a similar result which is the random walk model has the best forecasting performance. In this thesis, I want to find a model to beat the random walk model in forecasting the exchange rate. In my study, the vector autoregressive model (VAR), restricted vector autoregressive model (RVAR), vector error correction model (VEC), Bayesian vector autoregressive model are employed in the analysis. These multivariable time series models are compared with the random walk model by evaluating the forecasting accuracy of the exchange rate for three North European countries both in short-term and long-term. For short-term, it can be concluded that the random walk model has the best forecasting accuracy. However, for long-term, the random walk model is beaten. The equal accuracy test proves this phenomenon really exists.

Place, publisher, year, edition, pages
2011. , 31 p.
Keyword [en]
multivariable time series models, exchange rate, forecasting comparison, forecasting accuracy, equal accuracy test
Identifiers
URN: urn:nbn:se:uu:diva-154948OAI: oai:DiVA.org:uu-154948DiVA: diva2:422759
Subject / course
Statistics
Educational program
Master Programme in Statistics
Uppsok
Physics, Chemistry, Mathematics
Supervisors
Available from: 2011-06-14 Created: 2011-06-13 Last updated: 2011-06-14Bibliographically approved

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Yongtao, Yu
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Department of Statistics

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