MARKET-EFFICIENCY AND NATURAL-SELECTION IN A COMMODITY FUTURES MARKET

While the literature usually justifies informational efficiency in the context of rationality, this article shows informational efficiency b y applying the evolutionary idea of natural selection. In a dynamic fu tures market, speculators are assumed to merely act upon their predete rmined trading types (buyer or seller), their predetermined fractions of wealth allocated for speculation, and their inherent abilities to p redict the spot price, reflected in their distributions of prediction errors with respect to the spot price, This article shows that the pro portion of time that the futures price equals the spot price converges to one with probability 1.