The Returns to Following Currency Forecasts

62 Pages Posted: 3 Jan 2004

See all articles by Patrick Lehner

Patrick Lehner


John Okunev

Bond University Business School

Derek R. White

UNSW Australia Business School, School of Banking and Finance

Date Written: March 2004


This paper examines the profitability to following the recommendations of currency forecasters. Initially, we show in a Bayesian framework that the forecasts can be quite noisy and yet still allow the potential for profitable trading opportunities. Next, we analyze the recommendations of actual currency forecasts during the 1990-2003 period, ranking each currency by its expected appreciation to a base currency of reference. In general, we find limited evidence of positive but statistically insignificant returns by following the recommendations. Finally, when we combine the forecasted rankings with the rankings given by technical and interest rate signals, we find highly significant, positive returns.

Keywords: Currency, Foreign Exchange, Forecasts, Bayes

JEL Classification: C11, C15, F31

Suggested Citation

Lehner, Patrick and Okunev, John and White, Derek, The Returns to Following Currency Forecasts (March 2004). Available at SSRN: or

Patrick Lehner

Independent ( email )

John Okunev (Contact Author)

Bond University Business School ( email )

Gold Coast

Derek White

UNSW Australia Business School, School of Banking and Finance ( email )

Sydney, NSW 2052
+61 2 9385 5850 (Phone)
+61 2 9385 6347 (Fax)

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