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.
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The longer-term gold (45- and 60-day) and silver (30-, 45-, and 60-day) futures reject an unbiased expectations hypothesis. This result is consistent with Leistikow (1990) because cash prices respondless than futures prices in these instances.
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.
Futures and realized cash or settle prices for gold, silver, and copper

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