Prediction Markets Definitions – REDUX REDUX

No GravatarI would like to comment on the post from the Hatena Diary blog. (By the way, please note that my URL has changed, because I corrected one word in the post title. Sorry for the inconvenience.)

#1. Speculation-oriented prediction markets/exchanges: TradeSports, BetFair.

#2. Hedging-oriented prediction markets/exchanges: HedgeStreet and all the Chicago exchanges that will do binary, European call options.

#3. Forecast-oriented prediction markets/exchanges: Iowa Electronic Markets, AS CLAIMED BY THESE SCHOLARS WHOSE TASK WAS TO CONVINCE THE CFTC TO GRANT THEM A NO-ACTION LETTER. (They would have not gotten it, had they emphasized &#8220-speculation&#8221-. And, of course, &#8220-hedging&#8221- was out of question.) It&#8217-s a &#8220-claim&#8221- that might be discussed, since we&#8217-ve seen that TradeSports-InTrade is a much more powerful predictive tool for the US elections. Ditto for BetFair for U.K. elections.

#4. Decision-oriented prediction markets/exchanges: I would put here the kind of stuff that Robin Hanson is so excited about.

#5. Entertainment-oriented prediction markets/exchanges: Hollywood Stock Exchange, Washington Stock Exchange, Inkling, NewsFutures.

#6. Education-oriented prediction markets/exchanges: The Iowa Electronic Markets fits here, partially, regarding the use that professors around the country make of their markets in classrooms.


– I disagree with Google in #4. Maybe the Google internal prediction markets would fit in #3.

– I disagree with NewsFutures in #3 &#8212-I acknowledge (at least partially) the predictive power of play-money prediction exchanges, of course.


Should we judge markets/exchanges on INTENTIONS or on RESULTS? I don&#8217-t give a damn that TradeSports-InTrade and BetFair were created for speculation– if they have better predictive power than IEM, I&#8217-m fine with them. Ditto for the HSX. I don&#8217-t give the first fig that it was created as an entertainment tool. It&#8217-s the best forecasting tool for the movie business, period.


For the links to the prediction exchanges, see CFM.


Previous Blog Posts:

Prediction Markets DEFINITIONS – not a “taxonomy”

Professor Robin Hanson’s draft definitions is validated by professor Eric Zitzewitz.

Prediction Markets Definitions – REDUX

Prediction Markets Definitions – by Robin Hanson – 2006-11-21


Addendum: Robin Hanson has posted a comment&#8230-

“Oriented” is not clear enough for my tastes. Is this about trader motives? Trader results? Price results? Exchange motives?


My Answer: I meant &#8220-exchange motives&#8221-. [&#8230- See my comments. &#8230-] But now that I think of it, another classification taking account of the &#8220-price results&#8221- makes more sense.

Previous blog posts by Chris F. Masse: