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Information Spillovers and Predictable Currency Returns : An Analysis via Machine Learning

Jia, Yuecheng - 2020

This paper employs the post — Least Absolute Shrinkage and Selection Operator (post — LASSO) to make rolling 1-month--ahead currency excess return forecasts using all other currencies' lagged forward discounts as candidate predictors. The trading strategy of buying (selling) quintile...

Persistent link: https://www.econbiz.de/10012850361

Variance risk premiums in foreign exchange markets

Ammann, Manuel; Buesser, Ralf - 2013

Based on the theory of static replication of variance swaps we assess the sign and magnitude of variance risk premiums …

Persistent link: https://www.econbiz.de/10010410031

Housing cycles and exchange rates

Ma, Sai; Zhang, Shaojun - 2019

This paper documents that the housing cycle, measured by the residential investment share, is a strong in-sample and out-of-sample predictor for the dollar up to twelve quarters. Housing construction is negatively associated with risk premia in equity and bonds, but positively with foreign...

Persistent link: https://www.econbiz.de/10012120212

Market Timing and Predictability in FX Markets

Maurer, Thomas Andreas - 2020

We construct mean-variance optimized currency portfolios and analyze the time- series variation of the conditional Sharpe ratio. Returns, volatility and skewness are predictable. Market timing – i.e., trading more (less) aggressively when the conditional risk-return trade-off is more (less)...

Persistent link: https://www.econbiz.de/10012855418

Exchange Rate Prediction with Machine Learning and a Smart Carry Portfolio

Filippou, Ilias - 2020

We establish the out-of-sample predictability of monthly exchange rate changes via machine learning techniques based on 70 predictors capturing country characteristics, global variables, and their interactions. To guard against overfitting, we use the elastic net to estimate a high-dimensional...

Persistent link: https://www.econbiz.de/10012847704

Foreign Exchange Return Predictability : Rational Expectations Risk Premium vs. Expectational Errors

Moon, Seongman - 2019

We propose a simple identification scheme for the causes of the violations of uncovered interest parity. Our method uses the serial dependence patterns of excess returns as a criterion for judging performance of economic models. We show that a mean reverting component in excess returns,...

Persistent link: https://www.econbiz.de/10012895804

Exchange Rate Predictability and Dynamic Bayesian Learning

Beckmann, Joscha - 2019

This paper considers how an investor in the foreign exchange market can exploit predictive information by means of flexible Bayesian inference. Using a variety of different vector autoregressive models, the investor is able, each period, to revise past predictive mistakes and learn about...

Persistent link: https://www.econbiz.de/10012897719

Unemployment Fluctuations and the Predictability of Currency Returns

Nucera, Federico - 2017

We investigate whether unemployment fluctuations generate predictability in the cross-section of currency excess returns. We find that currencies with lower growth in the unemployment rate appreciate while currencies with higher growth in the unemployment rate depreciate. As a result, an...

Persistent link: https://www.econbiz.de/10012971272

Wave Function Method to Forecast Foreign Currencies Exchange Rates at Ultra High Frequency Electronic Trading in Foreign Currencies Exchange Markets

Ledenyov, Dimitri - 2015

exchange rates dynamics in the foreign currencies exchange markets in the classic finances theory; 3) the description on the … theory; 4) the derivation of the time dependent/time independent wave equation in the quantum finances theory; 5) the …/time independent wave equation in the quantum finances theory; 6) the discussion on the developed software program with the embedded …

Persistent link: https://www.econbiz.de/10013013057

The Quanto Theory of Exchange Rates

Kremens, Lukas - 2017

We present a new, theoretically motivated, forecasting variable for exchange rates that is based on the prices of quanto index contracts, and show via panel regressions that the quanto forecast variable is a statistically and economically significant predictor of currency appreciation. We also...

Persistent link: https://www.econbiz.de/10012958740

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