If the forward exchange rate is unbiased predictor of future spot rates, the expected mean of the deviations from the forward rate is zero.

Question

Quizplus · Accepted Answer

If the forward exchange rate is an unbiased predictor of future spot rates, it means that it is an accurate estimate of where the spot rate is expected to be at a future point in time. Therefore, there should be no systematic deviations from the expected spot rate, and the mean of the deviations from the forward rate should be zero.

If the Forward Exchange Rate Is Unbiased Predictor of Future