Exchange-rate forecasts and asymmetric loss: empirical evidence for the yen/dollar exchange rate

We used the yen/dollar exchange-rate forecasts of the <italic>Wall Street Journal</italic> (WSJ) poll to analyse whether exchange-rate forecasters have an asymmetric loss function. To this end, we applied an approach recently developed by Elliott <italic>et al</italic>. (2005). We found that only few forecasters seem to form forecasts under an asymmetric loss function. For some forecasters, accounting for the asymmetry of their loss function makes their forecasts look rational.