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.
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