Heterogeneity in Exchange Rate Expectations: Evidence on the Chartist-Fundamentalist Approach

31 Pages Posted: 18 Dec 2008

See all articles by Lukas Menkhoff

Lukas Menkhoff

German Institute for Economic Research (DIW Berlin); Humboldt University of Berlin - Faculty of Economics

Rafael R. Rebitzky

Leibniz University Hannover

Michael Schröder

ZEW – Leibniz Centre for European Economic Research - International Finance and Financial Management

Date Written: December 2008

Abstract

This paper examines heterogeneity in exchange rate expectations. Whereas agents' heterogeneity is key in modern exchange rate models, evidence on determinants of heterogeneity is weak so far. Our sample, covering expectations from about 300 forecasters over 15 years, shows remarkable time variation in dispersion. Determinants of dispersion are consistent with the chartist-fundamentalist approach: misalignments of the exchange rate and exchange rate changes explain heterogeneity. The risk premium influences heterogeneity as well, but possible impacts from macroeconomic variables and exchange rate's volatility are dominated by the other determinants.

Keywords: exchange rate, heterogeneity, dispersion, chartists, fundamentalists

JEL Classification: F31, G14

Suggested Citation

Menkhoff, Lukas and Rebitzky, Rafael R. and Schröder, Michael, Heterogeneity in Exchange Rate Expectations: Evidence on the Chartist-Fundamentalist Approach (December 2008). CESifo Working Paper Series No. 2502. Available at SSRN: https://ssrn.com/abstract=1317701

Lukas Menkhoff (Contact Author)

German Institute for Economic Research (DIW Berlin) ( email )

Mohrenstraße 58
Berlin, 10117
Germany

Humboldt University of Berlin - Faculty of Economics ( email )

Spandauer Strasse 1
Berlin
Germany

Rafael R. Rebitzky

Leibniz University Hannover ( email )

Institut fur Rechnungslegung und WP
Koenigsworther Platz 1
Hannover, 30167
Germany

Michael Schröder

ZEW – Leibniz Centre for European Economic Research - International Finance and Financial Management ( email )

L 7,1
P.O. Box 10 34 43
D-68034 Mannheim
Germany
+49 621 1235 368 (Phone)
+49 621 1235 223 (Fax)

HOME PAGE: http://www.zew.de/en/team/msc/?cHash=c9507802336d8f7db96848c539ed2f89

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