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Expectations theory of forward exchange rates |
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Expectations theory of forward exchange ratesA theory of foreign exchange rates that states that the expected future spot foreign exchange rate t periods from now equals the current t-period forward exchange rate.Expectations theory of forward exchange rates Similar MatchesHomogeneous expectations assumptionHomogeneous expectations assumptionAn assumption of Markowitz portfolio construction that investors have the same expectations with respect to the inputs that are used to derive efficient portfolios: asset returns, variances, and covariances. Expectations hypothesis theoriesExpectations hypothesis theoriesTheories of the term structure of interest rates, which include the pure expectations theory; the liquidity theory of the term structure, and the preferred habitat theory. These theories hold that each forward rate equals the expected future interest rate for the relevant period. These three theories differ, however, on whether other factors also affect forward rates, and how. Unbiased expectations hypothesisUnbiased expectations hypothesisTheory that forward exchange rates are unbiased predictors of future spot rates. See Forward parity. Local expectations theoryLocal expectations theoryA form of the pure expectations theory that suggests that the returns on bonds of different maturities will be the same over a short-term investment horizon. Rational expectationsRational expectationsThe idea that people rationally anticipate the future and respond today to what they see ahead. This concept was pioneered by Nobel Laureate, Robert E. Lucas, Jr. Further SuggestionsReturn to maturity expectationsLocal expectations hypothesis (LEH) |
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