If you have a small sample of real foreign currency exchange rates (e.g. Yen to Dollar), how would you use regression to forecast what the exchange rate will be at... say, 3 months from today?
My workgroup proposed using the same real data as both X variable and Y variable, using the data as X, then simply skip ahead 3 months, and use the same as Y.
For example, lets say we have data for Sept05, Oct05, Nov05, Dec05, Jan06 and so forth until May07.
Sept05's data would be X1, Oct05's would be X2 and so forth. We then would skip 3 months ahead and use Dec05's data as Y1, Jan06 as Y2, and so forth. Then we plot the data in Excel and use it to find a Regression equation.
The prof shot it down though so we are stumped.
Any pros here have any suggestion?
Thanks