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 National Bureau of Economic Research, Inc in its series NBER Working Papers with number
12083.
Length: Date of creation: Mar 2006 Date of revision: Handle: RePEc:nbr:nberwo:12083
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Find related papers by JEL classification: C53 - Mathematical and Quantitative Methods - - Econometric Modeling - - - Forecasting and Other Model Applications D8 - Microeconomics - - Information, Knowledge, and Uncertainty G14 - Financial Economics - - General Financial Markets - - - Information and Market Efficiency; Event Studies
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.:
Justin Wolfers & Eric Zitzewitz, 2004.
"Prediction Markets,"
Journal of Economic Perspectives,
American Economic Association, vol. 18(2), pages 107-126, Spring.
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Justin Wolfers & Eric Zitzewitz, 2004.
"Prediction Markets,"
NBER Working Papers
10504, National Bureau of Economic Research, Inc.
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