Determine whether there is a forecast bias in forward rate

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Reference no: EM13936056

Testing for a forecast bias. You must determine whether there is a forecast bias in the forward rate. You apply regression analysis to test the relationship between the actual spot rate and the forward rate forecast (F):

S ¼ a0 þ a1(F)

The regression results are as follows:

Coefficient	Standard Error
a0 ¼ 0.006	0.011
a1 ¼ 0.800	0.05

Based on these results, is there a bias in the forecast? Verify your conclusion. If there is a bias, explain whether it is an overestimate or an underestimate.

Reference no: EM13936056

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