The Random Behavior of the Flexible Exchange Rates: Implications for Forecasting

This article explores the forecasting accuracy of the “random walk” and other models of exchange rate behavior. Under present conditions of floating exchange rates, it is argued, anticipations of future demand and supply determine fluctuations in exchange rates. The authors present results consistent with the notion that, for the world's major currencies, the foreign exchange market is an “efficient market” and exchange rate forecasting is not profitable.© 1975 JIBS. Journal of International Business Studies (1975) 6, 1–32