What theory believes short-term investors dominate the market so that the forward rate will generally exceed the expected short rate?

Question

Quizplus · Accepted Answer

Liquidity preference theory suggests that investors demand a premium for holding longer-term securities, leading to a situation where the forward rate is higher than the expected future short-term interest rate. This is because short-term investors dominate the market, and they require compensation for the additional risk of holding longer-term securities.

What Theory Believes Short-Term Investors Dominate the Market So That