Individual Forecasts of Exchange Rates

37 Pages Posted: 9 Feb 2022 Last revised: 23 Jan 2023

See all articles by Magnus Dahlquist

Magnus Dahlquist

Stockholm School of Economics; Swedish House of Finance

Paul Söderlind

University of St. Gallen

Multiple version iconThere are 2 versions of this paper

Date Written: January 22, 2023


We study the expectations of individual forecasters in the foreign exchange market. We find that the survey risk premium is less countercyclical than the rational risk premium, primarily because it is not related to the forward premium. We also find that forecasters learn from their own forecast errors (rather than from consensus forecast errors) and that they overreact when forming expectations (as indicated by their forecast revisions). Finally, while forecasters have worse forecasting performance relative to a simple benchmark, the forecasters who emphasize the real exchange rate and do not overreact have better out-of-sample forecasting performance. Overall, our results highlight the information contained in individual (rather than consensus) exchange rate forecasts.

Keywords: Beliefs, currencies, expectations, foreign exchange rates, predictability

JEL Classification: D84, F31, F37, G12, G15

Suggested Citation

Dahlquist, Magnus and Söderlind, Paul, Individual Forecasts of Exchange Rates (January 22, 2023). Swedish House of Finance Research Paper No. 22-06, Available at SSRN: or

Magnus Dahlquist (Contact Author)

Stockholm School of Economics ( email )

Drottninggatan 98
Stockholm, SE-111 60

Swedish House of Finance ( email )

Drottninggatan 98
111 60 Stockholm

Paul Söderlind

University of St. Gallen ( email )

Rosenbergstrasse 52
St. Gallen, 9000
+41 71 224 7064 (Phone)
+41 71 224 7088 (Fax)

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