Foreign asset returns under exchange rate uncertainty: A classroom experiment

Abstract

This paper provides details on a classroom experiment that focuses on returns to foreign assets given uncertain future exchange rates. Students are assigned the role of foreign analysts and decide how much to invest abroad given their expectations about future exchange rates. The experiment allows students to practice calculating the returns to foreign investments, understand the benefits to skill in predicting future exchange rates, and observe the limitations to that skill. The experiment is ideal for undergraduate students in macroeconomics or international economics courses in a classroom that would allow students to separate into distinct groups.

Keywords:

• Economics
• international business education
• instructional design