Unbiased expectations hypothesis

(redirected from Biased Expectations Theory)

Unbiased expectations hypothesis

Theory that forward exchange rates are unbiased predictors of future spot rates. See Forward parity.
Copyright © 2012, Campbell R. Harvey. All Rights Reserved.

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.
Farlex Financial Dictionary. © 2012 Farlex, Inc. All Rights Reserved