expectations hypothesis

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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expectations hypothesis

The explanation that the slope of the yield curve is attributable to expectations of changes in short-term interest rates. The yield curve relates bond yields and maturity lengths.
Wall Street Words: An A to Z Guide to Investment Terms for Today's Investor by David L. Scott. Copyright © 2003 by Houghton Mifflin Company. Published by Houghton Mifflin Company. All rights reserved. All rights reserved.
References in periodicals archive ?
Comingled in their analysis is the bias that creeps in; this speaks to the "expectations hypothesis" that is rooted in economic theory.
This is inconsistent with the rational expectations hypothesis, and points to more realistic economic models of expectation formation and actual behavior.
Our results suggest that the rational expectations hypothesis is not fulfilled, but that the "weak form of rationality" is verified in any time horizon.
Voluntary turnover: An empirical test of the Met expectations hypothesis. Asia Pacific Journal of Human Resources, 28(3), 18-27.
According to the expectations hypothesis, which lies at the centre of the benchmark finance model, interest rates on term bonds are determined by the expected sum of short-term interest rates over the life of the bond (equation 1).
The use of an equation system (The model used in this review) in its rational expectations hypothesis and so the estimated equation system, In addition to the test neutrality of money can to test the rational expectations hypothesis.
The rational expectations hypothesis (REH) is a theoretically attractive framework for assessing the mechanism with which economic agents process information when formulating judgments about the real world (Krause 2000).
The topics discussed include rediscovering the macroeconomic roots of financial stability policy, inflation-indexed bonds and the expectations hypothesis, the economics of credit default swaps, equilibrium in the initial public offering market, and carry trade and momentum in currency markets.
First, if the rational expectations hypothesis holds continuously (i.e., Equation 3), the rejection of the FRUC could be due to the presence of a risk premium.