A Simple Proof That Futures Markets are Almost Always Informationally Inefficient
Ian Gale, Joseph Stiglitz
NBER Working Paper No. 3209
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.