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Investing Glossary:
Pure expectations theory
Copyright 2010,
Campbell R. Harvey. All Rights Reserved.
Do not reproduce without explicit permission.
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| Definition: |
| A theory that asserts that forward rates exclusively represent the expected Future rates. In other words, the entire Term structure reflects the market`s expectations of future Short-term rates. For example, an increasing slope to the term structure implies increasing short-term Interest rates. Related: Biased expectations heories.
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