Unbiased expectations hypothesis

Unbiased expectations hypothesis

Theory that forward exchange rates are unbiased predictors of future spot rates. See Forward parity.

Unbiased Expectations Hypothesis

In foreign exchange, a theory that forward exchange rates for delivery at some future date are equal to the spot rates for that date. The hypothesis only functions in the absence of a risk premium. Critics contend that the unbiased expectations evidence shows that unbiased expectations do not occur in actual trading. It is also called an unbiased predictor.
References in periodicals archive ?
The longer-term gold (45- and 60-day) and silver (30-, 45-, and 60-day) futures reject an unbiased expectations hypothesis.
Overall, an unbiased expectations hypothesis, with intercept of zero and slope of one, is satisfied for the near-term (15- and 30-day) gold futures, regardless of delivery date.
The longer-term gold (45- and 60-day) and silver (30-, 45-, and 60-day) futures reject an unbiased expectations hypothesis, with intercept coefficients significantly greater than zero and slope coefficients significantly less than one, but positive.