Forgotten effects and heavy moving averages in exchange rate forecasting

Abstract

This paper presents the results of using experton, forgotten effects and heavy moving averages operators in three traditional models based purchasing power parity (PPP) model to forecast exchange rate. Therefore, the use of these methods is to improve the forecast error under scenarios of volatility and uncertainty, such as the financial markets and more precise in exchange rate. The heavy ordered weighted moving average weighted average (HOWMAWA) operator is introduced. This new operator includes the weighted average in the usual heavy ordered weighted moving average (HOWMA) operator, considering a degree of importance for each concept that includes the operator. The use of experton and forgotten effects methodology represents the information of the experts in the field and with that information were obtained hidden variables or second degree relations. The results show that the inclusion of the forgotten effects and heavy moving average operators improve our results and reduce the forecast error.