Iw. Marsh et Dm. Power, A NOTE ON THE PERFORMANCE OF FOREIGN-EXCHANGE FORECASTERS IN A PORTFOLIO FRAMEWORK, Journal of banking & finance, 20(3), 1996, pp. 605-613
This note investigates the ability of 22 currency forecasters to predi
ct movements in three major exchange rates. In particular, it examines
the profitability of portfolios of forward market positions construct
ed on the basis of the predictions of each forecaster. The key finding
s of the paper are that just one panel member proves significantly pro
fitable to follow, and that investing on the basis of the naive altern
ative prediction of 'no change' produces high, though volatile, profit
s. We conclude that the majority of currency analysts have little abil
ity to predict the future.