Predictions

Contents

Probabilistic Predictions
Post-Mortem Predictions
Exchanges Running Prediction Markets
Software For Prediction Markets
Explainer On Prediction Markets
Resources On Prediction Markets

1. Dynamic, Objective Probabilistic Predictions = Charts Of Prediction Markets

Financial Markets

Gold

2010 US Elections

UK Elections

Next General Election – Most Seats

Next UK Prime Minister

Winner of Next UK Election – Political Party

UK Conservatives

UK Labour

2. Post-Mortem Predictions

- Charts Of Expired Prediction Markets

3. Exchanges Running Prediction Markets

Prediction Exchanges (a.k.a. Event Derivative Exchanges, Bet Exchanges, Betting Exchanges)

#1. Real-Money Prediction Exchanges

- InTrade

- TradeSports – Terminated

- Nadex – (North American Derivatives Exchange)

- Iowa Electronic Markets

- BetFair

#2. Play-Money Prediction Exchanges

- HudDub

- NewsFutures

- Inkling Markets – CNN Political Market

- InTrade .NET – InTrade (play money) – FT Predict

- BetFair (play money)

- Hollywood Stock Exchange

- The complete list of the main real-money and play-money prediction exchanges (betting exchanges) at Midas Oracle

- Another list of the real-money and play-money prediction exchanges (betting exchanges) at Midas Oracle

4. Software For Prediction Markets

Software For Prediction Markets

- Inkling Markets

- NewsFutures

- CrowdCast

- The complete list of the software packages for prediction markets at Midas Oracle

5. Explainer On Prediction Markets

The prediction market technology is not a disruptive technology, and the social utility of the prediction markets is marginal. Number one, the aggregated information has value only for the totally uninformed people (a group that comprises those who overly obsess with prediction markets and have a narrow cultural universe). Number two, the added accuracy (if any) is minute, and, anyway, doesn’t fill up the gap between expectations and omniscience (which is how people judge forecasters). In our view, the social utility of the prediction markets lays in efficiency, not in accuracy. In complicated situations, the prediction markets integrate expectations (informed by facts and expertise) much faster than the mass media do. Their accuracy/efficiency is their uniqueness. It is their velocity that we should put to work.

A prediction market is a market for a contract that yields payments based on the outcome of a partially uncertain future event, such as an election. A contract pays $100 only if candidate X wins the election, and $0 otherwise. When the market price of an X contract is $60, the prediction market believes that candidate X has a 60% chance of winning the election. The price of this event derivative represents the imputed perceived likelihood of the partially uncertain future outcome (i.e., its aggregated expected probability). A 60% probability means that, in a series of events each with a 60% probability, the favored outcome is expected to occur 60 times out of 100, and the unfavored outcome is expected to occur 40 times out of 100.

Each prediction exchange organizes its own set of real-money and/or play-money markets, using either a CDA or a MSR mechanism —with or without an automated market maker.

Prediction markets enable us to attain collective intelligence. Prediction markets produce dynamic, objective probabilistic predictions on the outcomes of future events by aggregating disparate pieces of information that the traders bring when they agree on prices. The event derivative traders are informed by the primary indicators (i.e., the primary sources of information), like the polls, for instance. These informed speculators then execute their transactions based on their anticipations about the future —anticipations that will be either confirmed or infirmed.

The value of a set of prediction markets consists in the added accuracy that these prediction markets provide relative to the other meta predictive mechanisms, times the value of accuracy in improved decisions, minus the cost of maintaining these prediction markets, relative to the cost of the other meta predictive mechanisms. A highly accurate set of prediction markets has little value if some other meta predictive mechanism(s) can provide similar accuracy at a lower cost, or if very few substantial decisions are influenced by accurate predictions on its topic.

California Institute of Technology economist Charles Plott:

What you’re doing is collecting bits and pieces of information and aggregating it so we can watch it and understand what people know. People picked this up and called it the “wisdom of crowds” and other things, but a lot of that is just hype.

More Info:

- The Midas Oracle Explainers On Prediction Markets

- All The Midas Oracle Explainers On Prediction Markets

6. Resources On Prediction Markets

Wikis On Prediction Markets

- Wikipedia – Prediction Markets

Books On Prediction Markets

- Winning On Betfair For Dummies – by Alex Gowar and Jack Houghton – 2006

- Information Markets – A New Way Of Making Decisions – (PDF file) – edited by AEI-Brookings’ Bob Hahn and Paul Tetlock – 2006

- The Wisdom Of Crowds – Why The Many Are Smarter Than The Few And How Collective Wisdom Shapes Business, Economies, Societies and Nations – by James Surowiecki – 2004

Research On Prediction Markets

- Prediction Markets: Trading Uncertainty for Collective Wisdom – (PDF file) – by NewsFutures’ Emile Servan-Schreiber – 2009-04-xx