Behavioral Finance Model Of The Exchange Rate With Many Forecasting Rules
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Behavioral Finance Model Of The Exchange Rate With Many Forecasting Rules
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Author :
language : en
Publisher:
Release Date : 2006
Behavioral Finance Model Of The Exchange Rate With Many Forecasting Rules written by and has been published by this book supported file pdf, txt, epub, kindle and other format this book has been release on 2006 with categories.
A Behavioral Finance Model Of The Exchange Rate With Many Forecasting Rules
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Author : Paul De Grauwe
language : en
Publisher:
Release Date : 2006
A Behavioral Finance Model Of The Exchange Rate With Many Forecasting Rules written by Paul De Grauwe and has been published by this book supported file pdf, txt, epub, kindle and other format this book has been release on 2006 with categories.
This paper presents a behavioral finance model of the exchange rate. Agents forecast the exchange rate by means of very simple rules. They can choose between three groups of forecasting rules: fundamentalist, extrapolative and momentum rules. Agents using a fundamentalist rule are not able to observe the true value of the fundamental exchange and therefore have to rely on an estimate of this variable to make a forecast. Based on simulation analysis we find that two types of equilibria exist, a fundamental and a non-fundamental one. Both the probability of finding a particular type of equilibrium and the probability of switching between different types of equilibria depend on the number of rules available to agents. Furthermore, we find that the exchange rate dynamics is sensitive to initial conditions and to the risk perception about the underlying fundamental. Both results are dependent on the number of forecasting rules.
A Behavioral Finance Model Of The Exchange Rate With Many Forecasting Rules
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Author : Paul De Grauwe
language : en
Publisher:
Release Date : 2013
A Behavioral Finance Model Of The Exchange Rate With Many Forecasting Rules written by Paul De Grauwe and has been published by this book supported file pdf, txt, epub, kindle and other format this book has been release on 2013 with categories.
This paper presents a behavioral finance model of the exchange rate. Agents forecast the exchange rate by means of very simple rules. They can choose between three groups of forecasting rules: fundamentalist, extrapolative and momentum rules. Agents using a fundamentalist rule are not able to observe the true value of the fundamental exchange and therefore have to rely on an estimate of this variable to make a forecast. Based on simulation analysis we find that two types of equilibria exist, a fundamental and a non-fundamental one. Both the probability of finding a particular type of equilibrium and the probability of switching between different types of equilibria depend on the number of rules available to agents. Furthermore, we find that the exchange rate dynamics is sensitive to initial conditions and to the risk perception about the underlying fundamental. Both results are dependent on the number of forecasting rules.
The Exchange Rate In A Behavioral Finance Framework
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Author : Paul De Grauwe
language : en
Publisher: Princeton University Press
Release Date : 2018-06-05
The Exchange Rate In A Behavioral Finance Framework written by Paul De Grauwe and has been published by Princeton University Press this book supported file pdf, txt, epub, kindle and other format this book has been release on 2018-06-05 with Business & Economics categories.
This book provides an alternative view of the workings of foreign exchange markets. The authors' modeling approach is based on the idea that agents use simple forecasting rules and switch to those rules that have been shown to be the most profitable in the past. This selection mechanism is based on trial and error and is probably the best possible strategy in an uncertain world, the authors contend. It creates a rich dynamic in the foreign exchange markets and can generate bubbles and crashes. Sensitivity to initial conditions is a pervasive force in De Grauwe and Grimaldi's model. It explains why large exchange-rate changes and volatility clustering occur. It also has important implications for understanding how the news affects the exchange rate. De Grauwe and Grimaldi conclude that news in fundamentals has an unpredictable effect on the exchange rate. Sometimes, they maintain, it alters the exchange rate considerably; at other times it has no effectwhatsoever. The authors also use their model to analyze the effects of official interventions in the foreign exchange market. They show that simple intervention rules of the "leaning-against-the-wind" variety can be effective in eliminating bubbles and crashes in the exchange rate. They further demonstrate how, quite paradoxically, by intervening in the foreign exchange market the central bank makes the market look more efficient. Clear and comprehensive, The Exchange Rate in a Behavioral Finance Framework is a must-have for analysts in foreign exchange markets as well as students of international finance and economics.
Exchange Rates And Global Financial Policies
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Author : Paul De Grauwe
language : en
Publisher: World Scientific
Release Date : 2014-02-04
Exchange Rates And Global Financial Policies written by Paul De Grauwe and has been published by World Scientific this book supported file pdf, txt, epub, kindle and other format this book has been release on 2014-02-04 with Business & Economics categories.
Exchange Rates and Global Financial Policies brings together research and work done by world-class economist Paul De Grauwe over the past two decades. Drawing inspiration from behavioural finance literature, De Grauwe covers topics such as exchange rate economics, monetary integration (with particular attention on the Eurozone), and international macroeconomics.His work is categorised across three parts. The first part develops new theoretical and empirical approaches to exchange rate modelling. The second part features a collection of papers on the theory and empirical analysis of monetary unions. The final part contains criticism of mainstream macroeconomic models as well as proposed alternative modelling approaches.
The Behavioral Economics Of Foreign Exchange Markets
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Author : Robert Schmidt
language : en
Publisher: Peter Lang Publishing
Release Date : 2006
The Behavioral Economics Of Foreign Exchange Markets written by Robert Schmidt and has been published by Peter Lang Publishing this book supported file pdf, txt, epub, kindle and other format this book has been release on 2006 with Business & Economics categories.
This book deals with psychological factors, which may be important for understanding the observable exchange rate movements. Thus, the study belongs to the new research field of behavioral economics, which considers the relevance of psychological factors in economic contexts. The main objective of behavioral economists is to develop a more realistic view of the actual human behavior in the context of economics. Central to the concept of behavioral economics is the assumption that humans' actual behavior deviates from the ideal of economic rationality due to at least two reasons: first, decisions are usually based on an incomplete information basis and, second, the information processing of human beings is limited by their computational capacities. Due to these limitations people are forced to apply simple heuristics in information processing. Our aim is to analyze the relevance of simple heuristics in the context of foreign exchange markets. In our view, the decision situation in foreign exchange markets can serve as a prime example for decision situations in which simple heuristics are especially relevant as the complexity of the decision situation is very high.
Exchange Rate Forecasting Techniques And Applications
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Author : I. Moosa
language : en
Publisher: Springer
Release Date : 2016-02-05
Exchange Rate Forecasting Techniques And Applications written by I. Moosa and has been published by Springer this book supported file pdf, txt, epub, kindle and other format this book has been release on 2016-02-05 with Business & Economics categories.
Forecasting exchange rates is a variable that preoccupies economists, businesses and governments, being more critical to more people than any other variable. In Exchange Rate Forecasting the author sets out to provide a concise survey of the techniques of forecasting - bringing together the various forecasting methods and applying them to the exchange rate in a highly accessible and readable manner. Highly practical in approach, the book provides an understanding of the techniques of forecasting with an emphasis on its applications and use in business decision-making, such as hedging, speculation, investment, financing and capital budgeting. In addition, the author also considers recent developments in the field, notably neural networks and chaos, again, with easy-to-understand explanations of these "rocket science" areas. The practical approach to forecasting is also reflected in the number of examples that pepper the text, whilst descriptions of some of the software packages that are used in practice to generate forecasts are also provided.
Lectures On Behavioral Macroeconomics
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Author : Paul De Grauwe
language : en
Publisher: Princeton University Press
Release Date : 2012-10-14
Lectures On Behavioral Macroeconomics written by Paul De Grauwe and has been published by Princeton University Press this book supported file pdf, txt, epub, kindle and other format this book has been release on 2012-10-14 with Business & Economics categories.
In mainstream economics, and particularly in New Keynesian macroeconomics, the booms and busts that characterize capitalism arise because of large external shocks. The combination of these shocks and the slow adjustments of wages and prices by rational agents leads to cyclical movements. In this book, Paul De Grauwe argues for a different macroeconomics model--one that works with an internal explanation of the business cycle and factors in agents' limited cognitive abilities. By creating a behavioral model that is not dependent on the prevailing concept of rationality, De Grauwe is better able to explain the fluctuations of economic activity that are an endemic feature of market economies. This new approach illustrates a richer macroeconomic dynamic that provides for a better understanding of fluctuations in output and inflation. De Grauwe shows that the behavioral model is driven by self-fulfilling waves of optimism and pessimism, or animal spirits. Booms and busts in economic activity are therefore natural outcomes of a behavioral model. The author uses this to analyze central issues in monetary policies, such as output stabilization, before extending his investigation into asset markets and more sophisticated forecasting rules. He also examines how well the theoretical predictions of the behavioral model perform when confronted with empirical data. Develops a behavioral macroeconomic model that assumes agents have limited cognitive abilities Shows how booms and busts are characteristic of market economies Explores the larger role of the central bank in the behavioral model Examines the destabilizing aspects of asset markets
Bubbles And Crashes In A Behavioural Finance Model
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Author : Paul De Grauwe
language : en
Publisher:
Release Date : 2013
Bubbles And Crashes In A Behavioural Finance Model written by Paul De Grauwe and has been published by this book supported file pdf, txt, epub, kindle and other format this book has been release on 2013 with categories.
We develop a simple model of the exchange rate in which agents optimize their portfolio and use different forecasting rules. They check the profitability of these rules ex post and select the more profitable one. This model produces two kinds of equilibria, a fundamental and a bubble one. In a stochastic environment the model generates a complex dynamics in which bubbles and crashes occur at unpredictable moments. We contrast these behavioural bubbles with rational bubbles.
Imperfect Knowledge Economics
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Author : Roman Frydman
language : en
Publisher: Princeton University Press
Release Date : 2007
Imperfect Knowledge Economics written by Roman Frydman and has been published by Princeton University Press this book supported file pdf, txt, epub, kindle and other format this book has been release on 2007 with Business & Economics categories.
Posing a major challenge to economic orthodoxy, Imperfect Knowledge Economics asserts that exact models of purposeful human behavior are beyond the reach of economic analysis. Roman Frydman and Michael Goldberg argue that the longstanding empirical failures of conventional economic models stem from their futile efforts to make exact predictions about the consequences of rational, self-interested behavior. Such predictions, based on mechanistic models of human behavior, disregard the importance of individual creativity and unforeseeable sociopolitical change. Scientific though these explanations may appear, they usually fail to predict how markets behave. And, the authors contend, recent behavioral models of the market are no less mechanistic than their conventional counterparts: they aim to generate exact predictions of "irrational" human behavior. Frydman and Goldberg offer a long-overdue response to the shortcomings of conventional economic models. Drawing attention to the inherent limits of economists' knowledge, they introduce a new approach to economic analysis: Imperfect Knowledge Economics (IKE). IKE rejects exact quantitative predictions of individual decisions and market outcomes in favor of mathematical models that generate only qualitative predictions of economic change. Using the foreign exchange market as a testing ground for IKE, this book sheds new light on exchange-rate and risk-premium movements, which have confounded conventional models for decades. Offering a fresh way to think about markets and representing a potential turning point in economics, Imperfect Knowledge Economics will be essential reading for economists, policymakers, and professional investors.