The Implications of an Informationally Efficient Futures Market

Abstract

The financialization of the commodity markets would have two effects. The first one is a liquidity effect, more speculators bring more liquidities. The second one is an informational effect, speculators come with their information which is more or less noisy. A burning issue is the consequences of these two effects on the physical market because of the feedback of the derivatives market. We decided to extend Ekeland et al. (2014) with information asymmetry. The core of both models is the same. We show that informational frictions make the futures price stochastic by integrating in it the information. Moreover, We prove two theorems which have empirical and theoretical consequences. First, the increasing weight of the informed speculation has the same effect as for the uninformed one because the equilibrium is fully revealing. Second, an efficient market implies a linear relationship between the futures price and the hedging pressure.