A stochastic approach to modelling the USD/AUD exchange rate: Implications for managing foreign exchange exposure

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dc.contributor.author Ellis, C
dc.contributor.author Wilson, PJ
dc.date.accessioned 2009-12-21T02:37:05Z
dc.date.issued 2005-01
dc.identifier.citation International Journal of Managerial Finance, 2005, 1 (1), pp. 36 - 48
dc.identifier.issn 1743-9132
dc.identifier.other C1 en_US
dc.identifier.uri http://hdl.handle.net/10453/5161
dc.description.abstract Purpose To develop an integrated approach to forecasting spot foreign exchange rates by incorporating some principles underlying long-term dependence. Design/methodology/approach The paper utilises the random-walk framework to develop a stochastic forecast model wherein the sign (positive or negative) and magnitude (strong or weak) of dependence can be separately controlled. The integrated model demonstrates superior forecast performance over a conventional random walk. Findings Using spot log prices and log price changes (returns) for the USD/AUD exchange rate, the initial outcomes of the study suggest that a priori knowledge of the underlying sign and magnitude of long-term dependence yields out-of-sample forecasts superior to those of a random walk model. Research limitations/implications Independent assessment of the contribution to forecast accuracy of controlling for the sign of dependence between successive price changes only shows little additional improvement in out-of-sample forecast performance over the random walk null. Practical implications The findings of the study have important ramifications for managerial finance as they provide important insights on expected future currency returns with potential advantages in currency hedging and/or timing of international capital flows.
dc.publisher Emerald Group Publishing Limited
dc.title A stochastic approach to modelling the USD/AUD exchange rate: Implications for managing foreign exchange exposure
dc.type Journal Article
dc.parent International Journal of Managerial Finance
dc.journal.volume 1
dc.journal.number 1 en_US
dc.publocation Bradford, UK en_US
dc.publocation Oxford
dc.identifier.startpage 36 en_US
dc.identifier.endpage 48 en_US
dc.cauo.name BUS.School of Finance and Economics en_US
dc.conference Verified OK en_US
dc.for 150299 Banking, Finance and Investment Not Elsewhere Classified
dc.personcode 760135
dc.personcode 944972
dc.percentage 100 en_US
dc.classification.name Banking, Finance and Investment not elsewhere classified en_US
dc.classification.type FOR-08 en_US
dc.edition 1
dc.description.keywords time series analysis; stochastic processes; foreign exchange en_US
dc.description.keywords sexual orientation, refugee law, gender related persecution, human rights law
dc.description.keywords time series analysis
dc.description.keywords stochastic processes
dc.description.keywords foreign exchange
pubs.embargo.period Not known
pubs.organisational-group /University of Technology Sydney
pubs.organisational-group /University of Technology Sydney/Faculty of Business
utslib.copyright.status Closed Access
utslib.copyright.date 2015-04-15 12:17:09.805752+10
utslib.collection.history Closed (ID: 3)


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