Modern currency exchange rate behaviour and proposed trend-like forecasting model

Tweneboah Senzu, Emmanuel (2020): Modern currency exchange rate behaviour and proposed trend-like forecasting model. Forthcoming in: Econometric Research in Finance , Vol. Vol. 5, No. Issue 2 : pp. 1-486.

Abstract

The study examined high volatile assets, specifically the currency exchange rate of the open financial market. Takes into consideration the five most traded paired currencies of the global financial market. And observed, generally, the dataset of the unit currency exchange rate exhibit homoscedastic qualities making it appropriate for the use of auto-regression integrated moving average as a reliable model forecast for future pricing of the volatile assets. However, the current model prediction addresses only the magnitude of asset price ignoring its direction, which is the paramount challenge of forecasters. Hence the paper resolves such weakness of the model by introducing a momentum model as a complementary tool to the ARIMA model to determine not only price magnitude but the vector direction of volatile asset pricing relative to the market, dependent on its lagged values.

• Item Type: MPRA Paper
• Language: English
• Keywords: Forecast, Momentum-model, Exchange rate, Homoscedacity, ARIMA, GARCH, Hard-currency
• Subjects: G - Financial Economics > G0 - General > G02 - Behavioral Finance: Underlying Principles; G - Financial Economics > G1 - General Financial Markets > G11 - Portfolio Choice ; Investment Decisions; G - Financial Economics > G1 - General Financial Markets > G12 - Asset Pricing ; Trading Volume ; Bond Interest Rates; G - Financial Economics > G1 - General Financial Markets > G15 - International Financial Markets; G - Financial Economics > G1 - General Financial Markets > G17 - Financial Forecasting and Simulation

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