A Simple Proof that Futures Markets are Almost Always Informationally Inefficient

21 Pages Posted: 9 Mar 2004 Last revised: 27 Sep 2008

See all articles by Ian L. Gale

Ian L. Gale

Georgetown University - Department of Economics

Joseph E. Stiglitz

Columbia Business School - Finance and Economics; 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 )

Washington, DC 20057
United States
(202) 687-5732 (Phone)

Joseph E. Stiglitz (Contact Author)

Columbia Business School - Finance and Economics ( email )

3022 Broadway
814 Uris Hall
New York, NY 10027
United States
(212) 854-0671 (Phone)
(212) 662-8474 (Fax)

HOME PAGE: http://www.josephstiglitz.com

National Bureau of Economic Research (NBER) ( email )

1050 Massachusetts Avenue
Cambridge, MA 02138
United States

Register to save articles to
your library

Register

Paper statistics

Downloads
53
Abstract Views
873
rank
381,082
PlumX Metrics