Evaluating the predictability of virtual exchange rates using daily data
| Author: | Bc. Martin Řanda |
|---|---|
| Year: | 2021 - summer |
| Leaders: | Mgr. Petr Polák MSc. Ph.D. |
| Consultants: | |
| Work type: | Bachelors |
| Language: | English |
| Pages: | 69 |
| Awards and prizes: | |
| Link: | https://ckis.cuni.cz:443/F/?func=direct&doc_number=002448009&local_base=CKS01&format=999 |
| 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 |
