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Experimental stock markets as instruments for business forecasts

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  • Michael Berlemann

Abstract

In the late 1980s a new forecasting method came into use: so-called experimental stock markets. This technique was used first in the area of election forecasting, later it was used in other fields, such as internal project monitoring or for predicting the outcome of referenda. This article presents the basic idea of experimental forecasting markets and gives a overview of the available empirical evidence. The results show that experimental forecasting markets can complement existing forecasting methods and are also suitable for the forecasting of key macroeconomic figures. They may thus be added in future to the traditional instruments used to forecast economic activity.

Suggested Citation

  • Michael Berlemann, 2004. "Experimental stock markets as instruments for business forecasts," ifo Schnelldienst, ifo Institute - Leibniz Institute for Economic Research at the University of Munich, vol. 57(16), pages 21-29, August.
    • Handle: RePEc:ces:ifosdt:v:57:y:2004:i:16:p:21-29
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    References listed on IDEAS

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    1. Forsythe, Robert & Forrest Nelson & George R. Neumann & Jack Wright, 1992. "Anatomy of an Experimental Political Stock Market," American Economic Review, American Economic Association, vol. 82(5), pages 1142-1161, December.
    2. Stephen A. Ross, 2013. "The Arbitrage Theory of Capital Asset Pricing," World Scientific Book Chapters, in: Leonard C MacLean & William T Ziemba (ed.), HANDBOOK OF THE FUNDAMENTALS OF FINANCIAL DECISION MAKING Part I, chapter 1, pages 11-30, World Scientific Publishing Co. Pte. Ltd..
    3. Klaus Beckmann & Martin Werding, 1996. "'Passauer Wahlbörse': Information Processing in a Political Market Experiment," Kyklos, Wiley Blackwell, vol. 49(2), pages 171-204, May.
    4. Berlemann, Michael & Schmidt, Carsten, 2001. "Predictive accuracy of political stock markets: Empirical evidence from a European perspective," SFB 373 Discussion Papers 2001,57, Humboldt University of Berlin, Interdisciplinary Research Project 373: Quantification and Simulation of Economic Processes.
    5. Michael Berlemann & Kalina Dimitrova & Nikolay Nenovsky, 2000. "Assessing Market Expectations on Exchange Rates and Inflation: A Pilot Forecasting System for Bulgaria," William Davidson Institute Working Papers Series wp759, William Davidson Institute at the University of Michigan.
    6. Michal Hlaváček & Adam Geršl & Tomáš Cahlík & Michael Berlemann, 2003. "Predikce využívající experimentální trhy [Predictions using experimental markets]," Politická ekonomie, Prague University of Economics and Business, vol. 2003(6), pages 838-850.
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    More about this item

    JEL classification:

    • F30 - International Economics - - International Finance - - - General
    • G00 - Financial Economics - - General - - - General
    • G12 - Financial Economics - - General Financial Markets - - - Asset Pricing; Trading Volume; Bond Interest Rates

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