Question: You must determine whether there is a forecast bias in the forward rate. You apply regression analysis to test the relationship between the actual spot

You must determine whether there is a forecast bias in the forward rate. You apply regression analysis to test the relationship between the actual spot rate and the forward rate forecast (F):
S = a0 + a1 (F)
The regression results are as follows:
Coefficient Standard Error
a0 = .006 ........ .011
a1 = .800 ....... .05
Based on these results, is there a bias in the forecast? Verify your conclusion. If there is a bias, explain whether it is an overestimate or an underestimate.

Step by Step Solution

★★★★★

3.37 Rating (166 Votes )

There are 3 Steps involved in it

1 Expert Approved Answer

Step: 1 Unlock

This question is appropriate with a background in regressio... View full answer

Question Has Been Solved by an Expert!

Get step-by-step solutions from verified subject matter experts

Step: 2 Unlock

Step: 3 Unlock

Document Format (1 attachment)

129-B-C-F-R-A-M (175).docx

120 KBs Word File

Students Have Also Explored These Related Corporate Finance Questions!

In Exercises: a) Find the vertex. b) Determine whether there is a maximum or minimum value and find that value. c) Find the range. d) Find the intervals on which the function is increasing and the...

A client wants to determine whether there is a significant difference in the time required to complete a program evaluation with the three different methods that are in common use. The times (in...

A sales analyst wants to determine whether there is a difference in the mean monthly sales of a companys four sales regions. Several salespersons from each region are randomly selected and they...

23 Testing for a forecast downward bias You must determine whether there is a forecast bias in the forward rate. You apply regression analysis to test the relationship between the actual spot rate...

You must determine whether there is a forecast bias in the forward rate. You apply regression analysis to test the relationship between the actual spot rate and the forward rate forecast (F): The...

c) (i) You must determine whether there is a forecast bias in the forward rate. You apply regression analysis to test the relationship between the actual spot rate and the forward rate forecast (F) :...

22 Testing for a forecast upward bias You must determine whether there is a forecast bias in the forward rate. You apply regression analysis to test the relationship between the actual spot rate and...

How is it possible for PPP to hold if the IFE does not? 1. PPP may still hold even if investors across countries do not require the same real returns. II. PPP may still hold even if the expected...

To test whether there is forecast bias in the forward exchange rate, you might estimate the regression equation S = a + bF + e where S is todays spot rate, F is the forward rate forecast of S (from a...

The treasurer of Glencoe, Inc., detected a forecast bias when using the 30-day forward rate of the euro to forecast future spot rates of the euro over various periods. He believes he can use this...

Two teenagers who made $70,000 in a month selling brainteaser puzzles at the height of Australias lockdown are setting their sights on Melbourne as the state re-enters Stage Three restrictions....

Instagram have recently entered the market. Due to the local elections politicians are anxious which of the Social Media they should use. It is estimated that of Facebooks customers 80% will remain...

Evaluate the definite integral. U - 6 6 5 s e c 2 ( x ) d x

Estimate the power (W/m 2 ) required to maintain a brass plate at Te = 15C while boiling saturated water at 1 atm. What is the power requirement if the water is pressurized to 10 atm? At what...

The condenser of a steam power plant consists of a square (in-line) array of 625 tubes, each of 25-mm diameters; consider conditions for which saturated steam at 0.105 bars condenses on the outer...

Figure P37.59 shows a radio-wave transmitter and a receiver separated by a distance d and both a distance h above the ground. The receiver can receive signals both directly from the transmitter and...

An aluminum alloy (2024) plate, heated to a uniform temperature of 227C, is al10wed to cool while vertically suspended in a room where the ambient air and surroundings are at 27C. The plate is 0.3 m...

(a) Derive an expression for the total shift in photon wavelength after two successive Compton scatterings from electrons at rest. The photon is scattered by an angle 1, in the first scattering and...

4. Does the legal team working on a case have a duty to remain silent when information about the case has been made public?

Judy (from problem 1) is also considering investing the $ 12,500 in a certificate of deposit (CD). She is guaranteed a return of 4% on a four year CD. How much would Judy earn from the CD? Which of...

Judy pays off her car loan and now must decide how she wants to invest the extra $ 3,648 per year that she budgeted for car payments. She decides to invest this additional amount in her employer...

Judy believes that another benefit of investing the extra $ 3,648 in her employer sponsored retirement plan is the tax savings. Judy is in a 25% marginal tax bracket. How much will investing in this...

Question 3 Not yet answered Marked out of 10.00 Fus question SE Task 3) Duna trip Inc. is evaluating the purchase of a new cruise ship. The ship would cost $44 million and would operate for 22 years,...

Use the information below to answer the following questions. U.S. $ EQUIVALENT CURRENCY PER U.S. $ Polish Zloty .2991 3.3436 Euro 1.2410 .8058 Mexican Peso .0752 13.2995 Swiss Franc 1.0320 .9690...

Perform train test split on iris dataset in r . First separate x and y variable.Before we separate them out, create vector/array of 1 and 2 to create train-test split in the ratio of 3:1. (Set a...