UNSW Business School
FINS5516 International Corporate Finance
Data Exercise
FactSet Access
All students in the Business School have been provided with
a FACTSET Account.
User Name Login Details:
firstname.lastname@factset.net
If you do NOT have a FACTSET account, email the School
of Banking and Finance (bankfinexams@unsw.edu.au) to
get you set up ASAP.
Mission
You are building a regression model to estimate the future USD/AUD exchange
rate.
You expect changes in future exchange rates depend on:
1. the countries’ real GDP growth rates,
2. the differences in inflation,
3. long-term interest rates between the countries.
Different Students will be assigned with
different exchange rate pair, please check
Moodle currency pair list to confirm the
mission assigned to you
Steps – Downloading Data and Setup a File
1. Obtain quarterly data from 2001Q1 to 2023Q3 on:
✓ USD/AUD spot exchange rate (FactSet identifier: AUDUSD)
✓ Economic growth for both countries, defined as the year-on-year % change in real GDP
✓ Inflation rates for both countries, defined as the year-on-year % change in CPI
✓ Long-term interest rates for both countries
2. Calculate the following:
• The change in exchange rates over (i) 1 quarter, (ii) 1 year, and (iii) 3 years. These should be
forward looking, i.e. the quarterly change for December 2022 is:
• Economic growth rates for both countries as a decimal. This is done by dividing the FactSet value
by 100.
• The inflation rate differential as a decimal, defined as the US rate less the Australian rate, and then
dividing this value by 100.
• The long-term interest rate differential as a decimal, defined as the US rate less the Australian rate,
and then dividing this value by
/
/
−
Steps – Estimating the Model and Forecasting
3. Estimate separate regression models for each change in exchange rate as functions of:
• both countries economic growth rates,
• the long-term interest rate differential, and
• the inflation rate differential.
4. Using your regression models, forecast the future change in exchange rates using the most
recently available quarterly economic data.
Step 1 - Download Data - FactSet
Login.factset.com => use your ID to login
Step 1 - Download Data - FactSet
Search AUDUSD (this is the exchange rate quote in the real world = textbook USD/AUD)
Step 1 - Download Data - FactSet
Find the “mid” rate of Spot Rate History
• Mid = mid of bid and ask
Find the mid in this setting buttom
Step 1 - Download Data - FactSet
Date range : 2001Q1 to 2023Q3
• START: 2023Q3
• END: 2001Q1
Step 1 - Download Data - FactSet
Download and get an Excel
• History of Quarterly Exchange Rates
Step 1 - Download Data - FactSet
1. Obtain quarterly data from 2001Q1 to 2023Q3 on:
✓ USD/AUD spot exchange rate (FactSet identifier: AUDUSD)
✓ Economic growth for both countries, defined as the year-on-year % change in real GDP
✓ Inflation rates for both countries, defined as the year-on-year % change in CPI
✓ Long-term interest rates for both countries
Figure out how to download the remaining by yourself !
• All quarterly data, for the same time period
Steps 2 – Prepare data for regression
2. Calculate the following:
• The change in exchange rates over (i) 1 quarter, (ii) 1 year, and (iii) 3 years. These should be
forward looking, i.e. the quarterly change for December 2022 is:
• Economic growth rates for both countries as a decimal. This is done by dividing the FactSet value
by 100.
• The inflation rate differential as a decimal, defined as the US rate less the Australian rate, and then
dividing this value by 100.
• The long-term interest rate differential as a decimal, defined as the US rate less the Australian rate,
and then dividing this value by
/
/
−
After calculation you will have:
Steps 2 – Prepare data for regression
3. Estimate separate regression models for each change in exchange rate as functions of:
• both countries economic growth rates,
• the long-term interest rate differential, and
• the inflation rate differential.
Steps 3 – Execute the regression
Dependent variable (Y) = Change in Exchange Rates
Independent variable (X) = the four factor
Steps 3 – Execute the regression
Do regression in Excel
Steps 3 – Execute the regression
Attention: row of Y Range and X Range must be consistent
Steps 3 – Execute the regression
You have the following regression results
Steps 4 – Forecast
“Newest” X data : e.g. 2023Q3 data
Steps 4 – Forecast
The forecasted number is the predicted change for 2023Q3 – 2023Q4
• (2024Q4 data is available already, of course you can download the
data to check how accurate it is)
Repeat the regression and forecast
Produce the other two forecast: 2023Q3 one-year and three-year exchange rate