"Empirical exchange-rate models of the seventies. Do they fit out of sample?" The discussion ignited by Meese / Rogoff's (1983) seminal paper is far from being settled. Especially from a practitioner's point of view, accuracy in terms of low RMSE should not be the only criterion for rejecting structural models in favour of the naïve random walk alternative. In our study, we collect empirical evidence of a trade-off between accuracy and profitability in foreign exchange forecasting.
