Price Discovery Among the Punters: Using New Financial Betting Markets to Predict Intraday Volatility – (PDF) – by Eric Zitzewitz – 2006-07-XX
Just to challenge a little the conventional wisdom that commercial prediction market exchanges need sports to make money: in my paper on Tradesports/Intrade’s binary Dow options, I note that only 54% of Tradesport’s volume comes from sports. 35% is financial contracts, 7% politics/current events, and 4% is entertainment.
This suggests that a real-money exchange like Intrade could probably survive without sports (obviously, it would prefer not to have to). Take away the financial contracts too though, and things don’t look so good.
(Of course, a caveat to this market share-based analysis is that ignores possible economies of scope. For instance, it may be that running sports markets attracts the “dumb money” that you need for the financial and politics prediction markets to work.
For the data see:
