What is ‘Unbiased Predictor’
The notion that the current market price of a physical commodity (its cash price or currency) will be equal to its anticipated future price based on the market’s forward rate. Like anything that relies on interest rate projections, this outlook can change as economic conditions change.
Explaining ‘Unbiased Predictor’
In statistical terms, “bias” is generally considered to be the variance between a prediction and the actual outcome, so an unbiased predictor is one that, one average, closely forecasts the future behavior of the variable under consideration. For example, if a futures contract is considered an unbiased predictor of oil prices, then when the contract expires the price of oil should correspond with the anticipated price.
Unbiased Predictor FAQ
What does it mean for an estimator to be unbiased?
How do you show an estimator is unbiased?
Why sample mean is unbiased estimator?
Why are unbiased estimators important?
What is interest rate parity with examples?
- Forward premiums as unbiased predictors of future currency depreciation: a non-parametric analysis – www.sciencedirect.com [PDF]
- Forward foreign exchange rates as an unbiased predictor of future spot rates: The empirical evidence – www.indianjournals.com [PDF]
- Google Internet search activity and volatility prediction in the market for foreign currency – www.sciencedirect.com [PDF]
- Non-informative tests of the unbiased forward exchange rate – www.jstor.org [PDF]
- Is the IPO pricing process efficient? – www.sciencedirect.com [PDF]
- The 'efficiency'of the London Metal Exchange: a test with overlapping and non-overlapping data – www.sciencedirect.com [PDF]
- Interest rate risk management with futures for financial intermediaries – www.tandfonline.com [PDF]