This paper tests whether forward prices equal the traders' expectations of the future spot prices at maturity, under two different models of expectations formation: full information rational expectations and incomplete information mechanical forecasting rule. The tests are performed, over the period January 1970 through September 1980, on the forward markets for the primary metals—copper, tin, lead, and zinc‐traded in the London Metals Exchange. We find evidence consistent with the existence of time varying risk premia. 1982 The American Finance Association