HomeDefinitionsCompareDebt Rational expectationsThe financial definition for Rational expectations:The idea that people rationally anticipate the future and respond today to what they see ahead. This concept was pioneered by Nobel Laureate, Robert E. Lucas, Jr. Similar MatchesExpectations hypothesis theoriesExpectations hypothesis theoriesTheories of the term structure of interest rates, which include the pure expectations theory; the liquidity theory of the term structure, and the preferred habitat theory. These theories hold that each forward rate equals the expected future interest rate for the relevant period. These three theories differ, however, on whether other factors also affect forward rates, and how. Expectations theory of forward exchange ratesExpectations theory of forward exchange ratesA theory of foreign exchange rates that states that the expected future spot foreign exchange rate t periods from now equals the current t-period forward exchange rate. Homogeneous expectations assumptionHomogeneous expectations assumptionAn assumption of Markowitz portfolio construction that investors have the same expectations with respect to the inputs that are used to derive efficient portfolios: asset returns, variances, and covariances. Further SuggestionsLocal expectations hypothesis (LEH)Local expectations theory Return to maturity expectations Unbiased expectations hypothesis Click to compare definitions of Rational expectations Click to view definitions beginning ra |