Work detail

Evaluating the predictability of virtual exchange rates using daily data

Author: Bc. Martin Řanda
Year: 2021 - summer
Leaders: Mgr. Petr Polák MSc. Ph.D.
Work type: Bachelors
Language: English
Pages: 69
Awards and prizes:
Abstract: Virtual worlds have garnered the attention of researchers from various disciplines and are viewed as particularly valuable to economists due to their openended design. In this thesis, we review a popular online multiplayer game’s
economy and focus on exchange rate predictability in a virtual setting as only
a limited body of literature investigated this topic. The well-established unpredictability puzzle is addressed by exploiting a unique daily time series dataset
using a vector autoregressive framework. Apart from a significant Grangercausal relationship between the virtual exchange rate and the player population, the system is shown to be less interconnected than expected. Furthermore,
an out-of-sample exercise is conducted, and the forecasting performance of our
models is examined in comparison to that of a simple no-change benchmark in
the short term. Based on the evaluation methods used, the two measures of the
virtual exchange rate are found to be somewhat predictable. We suggest two
explanations for this inconsistency between the virtual and real-world exchange
rates: data frequency and lack of complexity in the considered online economy


Česká Spořitelna


Patria Finance