Agreeing on disagreement: Heterogeneity or uncertainty?

Saskia ter Ellen, Willem F.C. Verschoor, Remco C.J. Zwinkels*

*Corresponding author for this work

Research output: Contribution to JournalArticleAcademicpeer-review

19 Downloads (Pure)

Abstract

We study whether disagreement is a useful proxy for uncertainty in the foreign exchange market using monthly forecasts for the euro, British pound, and Japanese yen against the U.S. dollar over the 2001–2017 period. We obtain measures of uncertainty and find that disagreement is not robustly related to uncertainty, as results depend heavily on the forecast horizon. In addition, we find that disagreement is positively associated with market liquidity and trading activity. This confirms that disagreement is not a proper proxy for uncertainty and suggests that it is more akin to heterogeneity.

Original languageEnglish
Pages (from-to)17-30
Number of pages14
JournalJournal of Financial Markets
Volume44
Early online date25 Feb 2019
DOIs
Publication statusPublished - Jun 2019

Keywords

  • Disagreement
  • Foreign exchange markets
  • Heterogeneity
  • Uncertainty

Fingerprint Dive into the research topics of 'Agreeing on disagreement: Heterogeneity or uncertainty?'. Together they form a unique fingerprint.

Cite this