Do Dollar Forecasters Believe too Much in PPP?

This paper extends earlier studies on exchange rate expectations' formation by using newdata and adding information about forecasters' reliance on fundamental analysis for the firsttime. We replicate the conventional result of non rational expectations. Moreover, biases inexpectations are identified as professionals significantly belief too much in mean reversion,mean being represented by PPP. When respondents are grouped on their reliance to fundamentalanalysis, fundamentalists reveal an even stronger bias. Those, who rely the least onfundamentals – preferring technical analysis instead –, show a significantly smaller bias towardsPPP in lieu of expecting too much trend extrapolation.[...] [Lukas Menkhoff, Rafael Rebitzky, Michael Schröder