When are prediction market prices most informative?

Brown, A., Reade, J.J. and Vaughan Williams, L. ORCID: 0000-0002-9639-9217, 2018. When are prediction market prices most informative? International Journal of Forecasting. ISSN 0169-2070

Preview

Text 11277_Vaughan-Williams.pdf - Post-print Download (317kB) | Preview

Abstract

Prediction markets are a popular platform for eliciting incentivised crowd predictions. In this paper, we examine variation in the information contained in prediction market prices by studying Intrade prices on U.S. elections around the release of opinion polls. We find that poll releases stimulate an immediate uptick in trading activity. However, much of this activity involves relatively inexperienced traders and, as a result, price efficiency declines in the immediate aftermath of a poll release. It is not until more experienced traders enter the market in the following hours that price efficiency recovers. More generally, this suggests that information releases do not necessarily improve prediction market forecasts, but may instead attract noise traders who temporarily reduce price efficiency.

Item Type:	Journal article
Publication Title:	International Journal of Forecasting
Creators:	Brown, A., Reade, J.J. and Vaughan Williams, L.
Publisher:	Elsevier
Date:	9 August 2018
ISSN:	0169-2070
Identifiers:	Number Type 10.1016/j.ijforecast.2018.05.005 DOI
Divisions:	Schools > Nottingham Business School
Record created by:	Linda Sullivan
Date Added:	05 Jun 2018 13:04
Last Modified:	15 Aug 2018 08:18
URI:	https://irep.ntu.ac.uk/id/eprint/33820

Actions (login required)

Edit View

Views

Downloads