The Effects of Uncertainty and Incomplete Information in a Foreign Exchange Market Subject to Noisy Rational Expectations
Title | The Effects of Uncertainty and Incomplete Information in a Foreign Exchange Market Subject to Noisy Rational Expectations PDF eBook |
Author | Edgar J. Wilson |
Publisher | |
Pages | 32 |
Release | 1987 |
Genre | Demand for money |
ISBN | 9780855906009 |
How Noisy are Noisy Rational Expectations? Evidence from a Currency Futures Market
Title | How Noisy are Noisy Rational Expectations? Evidence from a Currency Futures Market PDF eBook |
Author | Jin-wan Cho |
Publisher | |
Pages | |
Release | 1998 |
Genre | |
ISBN |
This paper takes a step towards assessing the importance of the role of prices as signals of aggregate information, by developing an approach to estimating primitive parameters of a noisy rational expectations model under perfect competition, when both prices and terminal values are observable. We show that the equilibrium variance-covariance parameters in the Hellwig (1980) model can be inverted to obtain values of the primitive parameters. This lets us identify the MLE of the precision of private information, using only restrictions on parameter values from the underlying theory and provides, conditional on a level of risk aversion, the MLE of the variance of exogenous supply noise. Using data from a currency futures market we then present estimates of the primitive parameters, of the signal-to-noise ratio, of weights that agents place on different sources of information, and of coefficients in the linear price conjecture.
Testing Rational Expectations and Efficiency in the Foreign Exchange Market
Title | Testing Rational Expectations and Efficiency in the Foreign Exchange Market PDF eBook |
Author | Richard T. Baillie |
Publisher | |
Pages | 10 |
Release | 1981 |
Genre | Foreign exchange |
ISBN |
Testing Rational Expectations and Efficiency in the Foreign Exchange Market
Title | Testing Rational Expectations and Efficiency in the Foreign Exchange Market PDF eBook |
Author | Richard T. Baillie |
Publisher | |
Pages | 24 |
Release | 1981 |
Genre | Foreign exchange |
ISBN | 9780868310695 |
The Role of Endogenous Uncertainty in Foreign Exchange Markets
Title | The Role of Endogenous Uncertainty in Foreign Exchange Markets PDF eBook |
Author | Stanley W. Black |
Publisher | |
Pages | 298 |
Release | 2005 |
Genre | |
ISBN |
Noisy Information and Expectation Formation in the Foreign Exchange Market
Title | Noisy Information and Expectation Formation in the Foreign Exchange Market PDF eBook |
Author | Alex Luiz Ferreira |
Publisher | |
Pages | 34 |
Release | 2016 |
Genre | |
ISBN |
Market microstructure and the imperfect common knowledge literature in macroeconomics both analyze the effect of dispersed information on prices. This paper draws on both sources to understand exchange rate forecasting errors. A theoretical model is developed showing that forecasting errors depend on both forecast revisions as in the Woodford noisy information model and order flow as in the Evans-Lyons simultaneous trade model. This is applied to Brazilian data using a unique data set of daily consensus exchange rate forecasts managed by the Banco Central do Brasil along with order flow derived from the FX futures market. The results strongly support the theory.
Rational Expectations, Learning by Error and the Efficiency of Foreign Exchange Markets
Title | Rational Expectations, Learning by Error and the Efficiency of Foreign Exchange Markets PDF eBook |
Author | Chong Tek Aik |
Publisher | |
Pages | 150 |
Release | 1986 |
Genre | Foreign exchange futures |
ISBN |