Prediction Markets + Market Predictions = Collective Forecasting That Pays Off

Author Archives: Hubertus Hofkirchner

No change: Mispricing is greater in illiquid markets.

Paul Tetlock’s latest paper on the subject of prediction markets “Does Liquidity Affect Securities Markets Efficiency?” follows the lines of the other authors whose model starts with the concept of first generation prediction markets, designed in such a way that their prices express probabilities.
First: We should not be surprised that those markets “underprice high probability [...]

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