A Simple Proof that Futures Markets are Almost Always Informationally Inefficient

21 Pages Posted: 9 Mar 2004 Last revised: 10 Apr 2022

See all articles by Ian L. Gale

Ian L. Gale

Georgetown University - Department of Economics

Joseph E. Stiglitz

Columbia University - Columbia Business School, Finance; National Bureau of Economic Research (NBER)

Date Written: December 1989

Abstract

Previous work which showed that prices could aggregate perfectly the diverse information of traders depended critically on the assumption that all agents had constant absolute risk utility. We show that either all agents must have constant absolute risk aversion utility, or all must have constant relative aversion in order for the strong form of the efficient market hypothesis to hold generically.

Suggested Citation

Gale, Ian L. and Stiglitz, Joseph E., A Simple Proof that Futures Markets are Almost Always Informationally Inefficient (December 1989). NBER Working Paper No. w3209, Available at SSRN: https://ssrn.com/abstract=315983

Ian L. Gale

Georgetown University - Department of Economics ( email )

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