How accurate are prediction markets in US elections?

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Yahoo! Answers on prediction markets

Previous blog posts by Chris F. Masse:

  • The Most Surprising Piece Of News I’ve Heard Today
  • My first prediction market plugin for WordPress
  • Self-Serving Prediction Market Of The Day — Unlawful Internet Gambling Enforcement Act of 2006
  • Prediction markets tend to be so illiquid, though, that mere activity looks like volatility.
  • Decision Markets and Futarchy are solutions in desperate search for a problem to solve and for their early adopters… and that may stay that way well after Robin Hanson’s head gets cryogenized.

Joyce Berg, director of the Iowa Electronic Markets, talks about how business schools are using the tool for research and teaching.

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She says prediction markets are &#8220-substitute&#8221- for polls&#8230- or any forecasting tool.

Read the previous blog posts by Chris F. Masse:

  • Never talk when you can nod, and never nod when you can wink, and never write an e-mail because it’s death. You’re giving prosecutors all the evidence we need.
  • Is Justin Wolfers a libertarian? Probably not.
  • The information technology that caught Eliot Spitzer
  • Eric Zitzewitz’s 10 minutes of fame
  • Fun with conditional probabilities
  • Wrongly Crafted Headlines Of The Day
  • an American, petite, very pretty brunette, 5 feet 5 inches, and 105 pounds

When Markets Beat The Polls – Scientific American Magazine

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Via Mat Fogarty of Xpree (an innovative firm providing software for enterprise prediction markets), the Scientific American magazine on prediction markets &#8211-&#8221-When Markets Beat the Polls&#8221-.

Ask me by e-mail to get a copy of the PDF file.


When Markets Beat the Polls– March 2008- Scientific American Magazine- by Gary Stix- 8 Page(s)

In late March 1988 three economists from the University of Iowa were nursing beers at a local hangout in Iowa City, when conversation turned to the news of the day. Jesse Jackson had captured 55 percent of the votes in the Michigan Democratic caucuses, an outcome that the polls had failed to intimate. The ensuing grumbling about the unreliability of polls sparked the germ of an idea. At the time, experimental economics&#8211-in which economic theory is tested by observing the behavior of groups, usually in a classroom setting&#8211-had just come into vogue, which prompted the three drinking partners to deliberate about whether a market might do better than the polls.

A market in political candidates would serve as a novel way to test an economic theory asserting that all information about a security is reflected in its price. For a stock or other financial security, the price summarizes, among other things, what traders know about the factors influencing whether a company will achieve its profit goals in the coming quarter or whether sales may plummet. Instead of recruiting students to imitate buyers or sellers of goods and services, as in other economics experiments, participants in this election market would trade contracts that would provide payoffs depending on what percentage of the vote George H. W. Bush, Michael Dukakis or other candidates received.

Robin Hanson had more.

Polls vs. Prediction Markets

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