Professor Zhang Qunzi Makes Important Breakthroughs in Exchange Rate Forecasting

Recently, the latest research findings Oil Strikes Back: Trend Factors and Exchange Rates, co-authored by Professor Zhang Qunzi from the School of Economics, Shandong University, Professor Han Liyan and Associate Professor Xu Yang from Beihang University, and Professor Zhu Xiaoneng from Shanghai University of Finance and Economics, was published online in Journal of Money, Credit & Banking, a top journal in macro finance.

This paper deeply explores the dynamic relationship between crude oil price and exchange rate, and constructs a trend factor based on crude oil price for the first time, providing a new perspective for exchange rate forecasting. The study finds that the oil price trend factor has significant predictive power for the short-term exchange rate returns of major currencies. The dynamic exchange rate portfolio constructed based on out-of-sample forecasting can achieve considerable economic returns. In addition, the crude oil price trend factor is closely related to macroeconomic variables such as industrial output value and inflation. The research shows that crude oil price, as a forward-looking indicator, contains information about future economic fluctuations, which provides a theoretical explanation for its predictive ability. The research results provide a new research perspective for the international financial field and are of great significance for understanding the exchange rate formation mechanism and improving the exchange rate forecasting model.

Zhang Qunzi is the Vice Dean, Professor and doctoral supervisor of the Department of Finance, School of Economics, Shandong University. She is the host of the National Natural Science Foundation for Excellent Young Scholars, a High-end Financial Talent of Shandong Province, a Distinguished Young and Middle-aged Scholar and Qilu Young Scholar of Shandong University. She is the person in charge of the "Double Leaders" Teacher Party Branch Studio in national colleges and universities, and the person in charge of Corporate Finance, a provincial-level first-class undergraduate course of Shandong Province.