NATIONAL BUREAU OF ECONOMIC RESEARCH
NATIONAL BUREAU OF ECONOMIC RESEARCH

A Simple Proof That Futures Markets are Almost Always Informationally Inefficient

Ian Gale, Joseph Stiglitz

NBER Working Paper No. 3209*
Issued in December 1989
NBER Program(s):   ME

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.

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