Perfect forecast line

Perfect forecast line

Graph of a slope that matches the forecast of an exchange rate with the actual exchange rate.
Copyright © 2012, Campbell R. Harvey. All Rights Reserved.

Perfect Forecast Line

In foreign exchange, a graphic representation of a forecast exchange rate that meets the actual exchange rate over a given set of periods. It is calculated as the slope of a forecasted exchange rate against the actual exchange rate. The forecasted exchange rates at given periods are usually also put on the graph; the closer the forecasted exchange rates are to the perfect forecast line, the better the predictions. The perfect forecast line is a prime tool used to evaluate the performance of future exchange rates forecasts.
Farlex Financial Dictionary. © 2012 Farlex, Inc. All Rights Reserved