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Prediction Markets in Theory and Practice Author info | Abstract | Publisher info | Download info | Related research | Statistics Wolfers, Justin (U of Pennsylvania)
Zitzewitz, Eric (Stanford U)
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Prediction Markets, sometimes referred to as "information markets," "idea futures" or "event futures", are markets where participants trade contracts whose payoffs are tied to a future event, thereby yielding prices that can be interpreted as market-aggregated forecasts. This article summarizes the recent literature on prediction markets, highlighting both theoretical contributions that emphasize the possibility that these markets efficiently aggregate disperse information, and the lessons from empirical applications which show that market-generated forecasts typically outperform most moderately sophisticated benchmarks. Along the way, we highlight areas ripe for future research.
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Paper provided by Stanford University, Graduate School of Business in its series Research Papers with number
1927.
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Date of creation: Feb 2006Date of revision:
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Paper Justin Wolfers & Eric Zitzewitz, 2006.
"Prediction Markets in Theory and Practice ,"
NBER Working Papers
12083, National Bureau of Economic Research, Inc.
[Downloadable!] (restricted) Wolfers, Justin & Zitzewitz, Eric, 2006.
"Prediction Markets in Theory and Practice ,"
CEPR Discussion Papers
5578, C.E.P.R. Discussion Papers.
[Downloadable!] (restricted) Justin Wolfers & Eric Zitzewitz, 2006.
"Prediction Markets in Theory and Practice ,"
IZA Discussion Papers
1991, Institute for the Study of Labor (IZA).
[Downloadable!] Find related papers by JEL classification: C53 - Mathematical and Quantitative Methods - - Econometric Modeling - - - Forecasting and Other Model Applications
References listed on IDEAS Please report citation or reference errors to , or , if you are the registered author of the cited work, log in to your RePEc Author Service profile , click on "citations" and make appropriate adjustments.:
Grossman, Sanford J & Stiglitz, Joseph E, 1976.
"Information and Competitive Price Systems ,"
American Economic Review ,
American Economic Association, vol. 66(2), pages 246-53, May.
Charles F. Manski, 2004.
"Interpreting the Predictions of Prediction Markets ,"
NBER Working Papers
10359, National Bureau of Economic Research, Inc.
[Downloadable!] (restricted)
Other versions: Colin F. Camerer, 1998.
"Can Asset Markets Be Manipulated? A Field Experiment with Racetrack Betting ,"
Natural Field Experiments
0026, The Field Experiments Website.
[Downloadable!]
Justin Wolfers & Eric Zitzewitz, 2006.
"Five Open Questions About Prediction Markets ,"
NBER Working Papers
12060, National Bureau of Economic Research, Inc.
[Downloadable!] (restricted)
Other versions:
Justin Wolfers & Eric Zitzewitz, 2006.
"Five open questions about prediction markets ,"
Working Paper Series
2006-06, Federal Reserve Bank of San Francisco.
[Downloadable!] Justin Wolfers & Eric Zitzewitz, 2006.
"Five Open Questions About Prediction Markets ,"
IZA Discussion Papers
1975, Institute for the Study of Labor (IZA).
[Downloadable!] Wolfers, Justin & Zitzewitz, Eric, 2006.
"Five Open Questions About Prediction Markets ,"
CEPR Discussion Papers
5562, C.E.P.R. Discussion Papers.
[Downloadable!] (restricted) Colin F. Camerer, 1998.
"Can Asset Markets Be Manipulated? A Field Experiment with Racetrack Betting ,"
Journal of Political Economy ,
University of Chicago Press, vol. 106(3), pages 457-482, June.
[Downloadable!] (restricted)
Erik Snowberg & Justin Wolfers & Eric Zitzewitz, 2006.
"Partisan Impacts on the Economy: Evidence from Prediction Markets and Close Elections ,"
NBER Working Papers
12073, National Bureau of Economic Research, Inc.
[Downloadable!] (restricted)
Other versions:
Snowberg, Erik & Wolfers, Justin & Zitzewitz, Eric, 2006.
"Partisan Impacts on the Economy: Evidence from Prediction Markets and Close Elections ,"
Research Papers
1928, Stanford University, Graduate School of Business.
[Downloadable!] Erik Snowberg & Justin Wolfers & Eric Zitzewitz, 2006.
"Partisan Impacts on the Economy: Evidence from Prediction Markets and Close Elections ,"
IZA Discussion Papers
1996, Institute for the Study of Labor (IZA).
[Downloadable!] Erik Snowberg & Justin Wolfers & Eric Zitzewitz, 2006.
"Partisan impacts on the economy: evidence from prediction markets and close elections ,"
Working Paper Series
2006-08, Federal Reserve Bank of San Francisco.
[Downloadable!] 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.
[Downloadable!] (restricted) Erik Snowberg & Justin Wolfers & Eric Zitzewitz, 2007.
"Partisan Impacts on the Economy: Evidence From Prediction Markets and Close Elections ,"
The Quarterly Journal of Economics ,
MIT Press, vol. 122(2), pages 807-829, 05.
[Downloadable!] (restricted) Plott, Charles R. & Chen, Kay-Yut, 2002.
"Information Aggregation Mechanisms: Concept, Design and Implementation for a Sales Forecasting Problem ,"
Working Papers
1131, California Institute of Technology, Division of the Humanities and Social Sciences.
[Downloadable!]
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.
[Downloadable!] (restricted)
Justin Wolfers & Eric Zitzewitz, 2004.
"Prediction Markets ,"
Journal of Economic Perspectives ,
American Economic Association, vol. 18(2), pages 107-126, Spring.
[Downloadable!] (restricted)
Other versions:
Justin Wolfers & Eric Zitzewitz, 2004.
"Prediction Markets ,"
NBER Working Papers
10504, National Bureau of Economic Research, Inc.
[Downloadable!] (restricted) Wolfers, Justin & Zitzewitz, Eric, 2004.
"Prediction Markets ,"
Research Papers
1854, Stanford University, Graduate School of Business.
[Downloadable!] Milgrom, Paul & Stokey, Nancy, 1982.
"Information, trade and common knowledge ,"
Journal of Economic Theory ,
Elsevier, vol. 26(1), pages 17-27, February.
[Downloadable!] (restricted)
Other versions: Camerer, Colin, 1996.
"Can Asset Markets be Manipulated? A Field Experiment with Racetrack Betting ,"
Working Papers
983, California Institute of Technology, Division of the Humanities and Social Sciences.
[Downloadable!]
Refet Gurkaynak & Justin Wolfers, 2005.
"Macroeconomic Derivatives: An Initial Analysis of Market-Based Macro Forecasts, Uncertainty, and Risk ,"
NBER Chapters ,
in: NBER International Seminar on Macroeconomics 2005
National Bureau of Economic Research, Inc.
[Downloadable!]
Other versions:
Refet S. Gürkaynak & Justin Wolfers, 2005.
"Macroeconomic Derivatives: An Initial Analysis of Market-Based Macro Forecasts, Uncertainty and Risk ,"
IZA Discussion Papers
1899, Institute for the Study of Labor (IZA).
[Downloadable!] Refet Gurkaynak & Justin Wolfers, 2006.
"Macroeconomic Derivatives: An Initial Analysis of Market-Based Macro Forecasts, Uncertainty, and Risk ,"
NBER Working Papers
11929, National Bureau of Economic Research, Inc.
[Downloadable!] (restricted) Refet S. Gürkaynak & Justin Wolfers, 2005.
"Macroeconomic derivatives: an initial analysis of market-based macro forecasts, uncertainty, and risk ,"
Working Paper Series
2005-26, Federal Reserve Bank of San Francisco.
[Downloadable!] Gürkaynak, Refet S. & Wolfers, Justin, 2006.
"Macroeconomic Derivatives: An Initial Analysis of Market-Based Macro Forecasts, Uncertainty and Risk ,"
CEPR Discussion Papers
5466, C.E.P.R. Discussion Papers.
[Downloadable!] (restricted) Robin Hanson, 2006.
"Designing real terrorism futures ,"
Public Choice ,
Springer, vol. 128(1), pages 257-274, July.
[Downloadable!] (restricted)
Sunder, S., 1992.
"Experimental Asset Markets: A Survey ,"
GSIA Working Papers
1992-19, Carnegie Mellon University, Tepper School of Business.
Wolfers, Justin & Zitzewitz, Eric, 2006.
"Interpreting Prediction Market Prices as Probabilities ,"
CEPR Discussion Papers
5676, C.E.P.R. Discussion Papers.
[Downloadable!] (restricted)
Other versions:
Justin Wolfers & Eric Zitzewitz, 2006.
"Interpreting Prediction Market Prices as Probabilities ,"
NBER Working Papers
12200, National Bureau of Economic Research, Inc.
[Downloadable!] (restricted) Justin Wolfers & Eric Zitzewitz, 2006.
"Interpreting prediction market prices as probabilities ,"
Working Paper Series
2006-11, Federal Reserve Bank of San Francisco.
[Downloadable!] Justin Wolfers & Eric Zitzewitz, 2006.
"Interpreting Prediction Market Prices as Probabilities ,"
IZA Discussion Papers
2092, Institute for the Study of Labor (IZA).
[Downloadable!] Knight, Brian, 2006.
"Are policy platforms capitalized into equity prices? Evidence from the Bush/Gore 2000 Presidential Election ,"
Journal of Public Economics ,
Elsevier, vol. 90(4-5), pages 751-773, May.
[Downloadable!] (restricted)
Other versions:
Brian Knight, 2004.
"Are Policy Platforms Capitalized into Equity Prices? Evidence from the Bush/Gore 2000 Presidential Election ,"
NBER Working Papers
10333, National Bureau of Economic Research, Inc.
[Downloadable!] (restricted) Knight*, Brian, 2007.
"Are policy platforms capitalized into equity prices? Evidence from the Bush/Gore 2000 Presidential Election ,"
Journal of Public Economics ,
Elsevier, vol. 91(1-2), pages 389-409, February.
[Downloadable!] (restricted) Justin Wolfers & Eric Zitzewitz, 2007.
"Experimental Political Betting Markets and the 2004 Election ,"
The Economists' Voice ,
Berkeley Electronic Press, vol. 1(2), pages 1.
[Downloadable!]
Paul W. Rhode & Koleman S. Strumpf, 2004.
"Historical Presidential Betting Markets ,"
Journal of Economic Perspectives ,
American Economic Association, vol. 18(2), pages 127-142, Spring.
[Downloadable!] (restricted)
Justin Wolfers & Eric Zitzewitz, 2009.
"Using Markets to Inform Policy: The Case of the Iraq War ,"
Economica ,
London School of Economics and Political Science, vol. 76(302), pages 225-250, 04.
[Downloadable!] (restricted)
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references Cited by : (explanations , Please report citation or reference errors to , or , if you are the registered author of the cited work, log in to your RePEc Author Service profile , click on "citations" and make appropriate adjustments.)
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