Chapter 8 The economic value of leading edge techniques for exchange rate prediction

CHRISTIAN L. DUNIS

8.1 INTRODUCTION

During the past decade, empirical evidence has emerged that pockets of predictability do exist in financial markets. Academics have developed new mathematical and statistical tools to help predict future price movements. These new techniques, which rely heavily on the analysis of nonlinearities, are now used by some major trading institutions and fund managers and there is an ever increasing interest from large corporates too.

Today’s financial markets are characterized by a large number of participants, with their different appetites for risk, their different time horizon and their different motivations and reactions to ...

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