Explain the random walk model for exchange rate forecasting, Ask an Expert

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Explain the random walk model for exchange rate forecasting. Can it be consistent along with the technical analysis?

Answer: The random walk model assumes that the current exchange rate will be the extremely best predictor of the future exchange rate. A suggestion of the model is that past history of the exchange rate is of no value in predicting future exchange rate. So the model is inconsistent with the technical analysis that tries to utilize past history in predicting the future exchange rate.

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Category:- Financial Management
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