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Throughout the past year, Turkey's central bank policy to decrease thenominal interest rate has caused episodes of severe fluctuations in Turkishlira exchange rates. According to these conditions, the daily return of theUSD/TRY have attracted the risk-taker investors' attention. Therefore, theuncertainty about the rates has pushed algorithmic traders toward finding thebest forecasting model. While there is a growing tendency to employsophisticated models to forecast financial time series, in most cases, simplemodels can provide more precise forecasts. To examine that claim, present studyhas utilized several models to predict daily exchange rates for a shorthorizon. Interestingly, the simple exponential smoothing model outperformed allother alternatives. Besides, in contrast to the initial inferences, the timeseries neither had structural break nor exhibited signs of the ARCH andleverage effects. Despite that behavior, there was undeniable evidence of along-memory trend. That means the series tends to keep a movement, at least fora short period. Finally, the study concluded the simple models provide betterforecasts for exchange rates than the complicated approaches.

Forecasting the Turkish Lira Exchange Rates through Univariate Techniques: Can the Simple Models Outperform the Sophisticated Ones?