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Five Open Questions About Prediction Markets

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  • Wolfers, Justin
  • Zitzewitz, Eric

Abstract

Interest in prediction markets has increased in the last decade, driven in part by the hope that these markets will prove to be valuable tools in forecasting, decision-making and risk management - in both the public and private sectors. This paper outlines five open questions in the literature, and we argue that resolving these questions is crucial to determining whether current optimism about prediction markets will be realized.

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Paper provided by C.E.P.R. Discussion Papers in its series CEPR Discussion Papers with number 5562.

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Date of creation: Mar 2006
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Handle: RePEc:cpr:ceprdp:5562

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Related research

Keywords: event futures; information markets; instrumental variables; market manipulation; prediction IV; prediction markets;

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References

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  1. Wolfers, Justin & Zitzewitz, Eric, 2006. "Interpreting Prediction Market Prices as Probabilities," IZA Discussion Papers 2092, Institute for the Study of Labor (IZA).
  2. Andrei Shleifer ad Robert W. Vishny, 1995. "The Limits of Arbitrage," Harvard Institute of Economic Research Working Papers 1725, Harvard - Institute of Economic Research.
  3. Justin Wolfers & Eric Zitzewitz, 2004. "Prediction Markets," NBER Working Papers 10504, National Bureau of Economic Research, Inc.
  4. Snowberg, Erik & Wolfers, Justin & Zitzewitz, Eric, 2006. "Partisan Impacts on the Economy: Evidence from Prediction Markets and Close Elections," CEPR Discussion Papers 5591, C.E.P.R. Discussion Papers.
  5. Leigh, Andrew & Wolfers, Justin & Zitzewitz, Eric, 2003. "What do Financial Markets Think of War in Iraq?," Research Papers 1785, Stanford University, Graduate School of Business.
  6. Paul Milgrom & Nancy L.Stokey, 1979. "Information, Trade, and Common Knowledge," Discussion Papers 377R, Northwestern University, Center for Mathematical Studies in Economics and Management Science.
  7. repec:reg:rpubli:259 is not listed on IDEAS
  8. Kyle, Albert S, 1985. "Continuous Auctions and Insider Trading," Econometrica, Econometric Society, vol. 53(6), pages 1315-35, November.
  9. Wolfers, Justin & Zitzewitz, Eric, 2004. "Experimental Political Betting Markets and the 2004 Election," Working paper 430, Regulation2point0.
  10. Slemrod, Joel & Greimel, Timothy, 1999. "Did Steve Forbes scare the US municipal bond market?," Journal of Public Economics, Elsevier, vol. 74(1), pages 81-96, October.
  11. repec:reg:rpubli:430 is not listed on IDEAS
  12. Thaler, Richard H & Ziemba, William T, 1988. "Parimutuel Betting Markets: Racetracks and Lotteries," Journal of Economic Perspectives, American Economic Association, vol. 2(2), pages 161-74, Spring.
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Citations

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Cited by:
  1. Abraham Othman & Tuomas Sandholm, 2013. "The Gates Hillman prediction market," Review of Economic Design, Springer, vol. 17(2), pages 95-128, June.
  2. David S. Lee & Enrico Moretti, 2009. "Bayesian Learning and the Pricing of New Information: Evidence from Prediction Markets," American Economic Review, American Economic Association, vol. 99(2), pages 330-36, May.
  3. Justin Wolfers & Eric Zitzewitz, 2006. "Prediction Markets in Theory and Practice," NBER Working Papers 12083, National Bureau of Economic Research, Inc.
  4. R. Karina Gallardo & B. Wade Brorsen & Jayson Lusk, 2010. "Prediction markets: an experimental approach to forecasting cattle on feed," Agricultural Finance Review, Emerald Group Publishing, vol. 70(3), pages 414-426, November.
  5. Jackson, Aaron L., 2010. "Policy futures markets with multiple goals," Journal of Macroeconomics, Elsevier, vol. 32(1), pages 45-54, March.

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