Unbiased Predictor

DEFINITION of 'Unbiased Predictor'

The notion that the current market price of a physical commodity (its cash price or currency) will be equal to its anticipated future price based on the market's forward rate. Like anything that relies on interest rate projections, this outlook can change as economic conditions change.

BREAKING DOWN 'Unbiased Predictor'

In statistical terms, "bias" is generally considered to be the variance between a prediction and the actual outcome, so an unbiased predictor is one that, one average, closely forecasts the future behavior of the variable under consideration. For example, if a futures contract is considered an unbiased predictor of oil prices, then when the contract expires the price of oil should correspond with the anticipated price.

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