How Much Are Exchange Rate Forecasts Worth?

This paper undertakes empirical tests of the ability of foreign exchange market participants to forecast the future value of the Australian dollar for one- and four-week horizons. A new set of survey data published in The Australian newspaper is used for this purpose. The accuracy of the forecasts is compared with that of the forecasts given by the random walk model which corresponds to no-change extrapolation. In general, the results indicate that no-change extrapolation is almost as good as the survey forecasts.