Evolution and Informationally Efficient Equilibrium in a Commodity Futures Market

  • Guo Ying Luo
Part of the Studies in Economic Theory book series (ECON.THEORY, volume 28)


This chapter presents an evolutionary model of a futures market to justify the eventual occurrence of an informationally efficient equilibrium. While  the literature usually justifies informational efficiency in the context of rationality, here, in this dynamic futures market, traders do not maximize their profits or utilities nor do they form rational expectation about spot prices. Instead, they are preprogramed with some predetermined behavioral traits (such as trading types (buyer or seller), traders’ inherent abilities to predict the spot price). With the markets serving as a selection process of information, it can be shown that the proportion of time that the futures price equal to the spot price converges to one with probability one.


Future Market Future Price Future Contract Spot Price Short Seller 
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Copyright information

© Springer Science+Business Media, LLC 2012

Authors and Affiliations

  1. 1.DeGroote School of BusinessMcMaster UniversityHamiltonCanada

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