This paper combines survey forecasts with a heterogeneous agent model to examine the dispersion of expectations of participants in the foreign exchange market. We find distinct variations in the level of dispersion and document that dispersion arises because of the combined effect of market...

In order to study the expectation formation of financial institutions in the foreign exchange market we develop and apply a recursive selection and estimation algorithm to a dataset of surveyed foreign exchange market expectations. Responses are classified into two groups and forecasting models...