A theory that forward interest rates can be used as a barometer for future interest rates. Investors expecting higher short-term interest rates are more likely to buy bonds maturing in the short term. If the were to park money into a long term debt they might not be able to make as much interest.
Related information about expectations theory:
- Expectations Theory Definition | Investopedia
Expectations theory postulates that you would earn the same amount of interest by investing in a one-year bond today and rolling that investment into a new ...
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Expectations Theory of Interest Rates provided by EagleTraders.com.
- Pure Expectations Theory
Apr 20, 2012 ... The pure expectations theory is the simplest of the interest rate theories. It assumes that yields at higher maturities (such as that of 5,10, or 30 ...
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We explain the definition of Expectations Theory, provide a clear example of how it works and explain why it's an important concept in business, finance ...
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Rational expectations theory defines this kind of expectations as being identical to the best guess of the future (the optimal forecast) that uses all available ...
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Shortcomings of expectations theory: Neglects the risks inherent in investing in ... The Liquidity Premium Theory is an offshoot of the Pure Expectations Theory.
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Definition of expectations theory: A theory that forward interest rates can be used as a barometer for future interest rates. Investors expecting higher short-term ...
- Rational Expectations: The Concise Encyclopedia of Economics ...
But proponents of the rational expectations theory are more thorough in their analysis of expectations. The influences between expectations and outcomes flow ...