This paper uses Markov switching models to capture volatility dynamics in exchange rates and to evaluate their forecasting ability. We identify that increased volatilities in four euro-based exchange rates are due to underlying structural changes. Also, we find that currencies are closely...

This paper investigates patterns to assist investors to forecast future exchange rate movements. We test for overreaction and underreaction examining exchange rate changes following excess 1-day fluctuations for currencies in two emerging (Turkey, Brazil) and two developed (US, UK) countries....