Rational expectations
The idea that people rationally anticipate the future and respond to what they see ahead. |
Similar financial terms
Operationally efficient marketAlso called an internally efficient market, one in which investors can obtain transactions services that reflect the true costs associated with furnishing those services.
Rationality
In game theory, one of the most common assumptions made is that every player/participant is rational. In its mildest form, rationality implies that every player is motivated by maximizing his own payoff. In a stricter sense, it implies that every player always maximizes his utility, thus being able to perfectly calculate the probabilistic result of every action.
Return-to-maturity expectations
A variant of pure expectations theory which suggests that the return that an investor will realize by rolling over short-term bonds to some investment horizon will be the same as holding a zero-coupon bond with a maturity that is the same as that investment horizon.
Pure expectations theory
A theory that asserts that the forward rates exclusively represent the expected future rates. In other words, the entire term structure reflects the markets expectations of future short-term rates. For example, an increasing sloping term structure implies increasing short-term interest rates. Related: biased expectations theories
Local expectations theory
A form of the pure expectations theory which suggests that the returns on bonds of different maturities will be the same over a short-term investment horizon.
