A NOTE ON THE PERFORMANCE OF FOREIGN-EXCHANGE FORECASTERS IN A PORTFOLIO FRAMEWORK

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.