Advanced Search
MyIDEAS: Login to save this paper or follow this series

Prediction Markets in Theory and Practice

Contents:

Author Info

  • Justin Wolfers
  • Eric Zitzewitz

Abstract

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.

Download Info

If you experience problems downloading a file, check if you have the proper application to view it first. In case of further problems read the IDEAS help page. Note that these files are not on the IDEAS site. Please be patient as the files may be large.
File URL: http://www.nber.org/papers/w12083.pdf
Download Restriction: no

Bibliographic Info

Paper provided by National Bureau of Economic Research, Inc in its series NBER Working Papers with number 12083.

as in new window
Length:
Date of creation: Mar 2006
Date of revision:
Publication status: published as Blume, Larry and Steven Durlauf (eds.) The New Palgrave Dictionary of Economics, 2nd ed. London: Palgrave, 2008.
Handle: RePEc:nbr:nberwo:12083

Note: AP EFG
Contact details of provider:
Postal: National Bureau of Economic Research, 1050 Massachusetts Avenue Cambridge, MA 02138, U.S.A.
Phone: 617-868-3900
Email:
Web page: http://www.nber.org
More information through EDIRC

Related research

Keywords:

Other versions of this item:

Find related papers by JEL classification:

References

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.:
as in new window
  1. Justin Wolfers & Eric Zitzewitz, 2006. "Interpreting Prediction Market Prices as Probabilities," NBER Working Papers 12200, National Bureau of Economic Research, Inc.
  2. Sunder, S., 1992. "Experimental Asset Markets: A Survey," GSIA Working Papers 1992-19, Carnegie Mellon University, Tepper School of Business.
  3. 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.
  4. Paul W. Rhode & Koleman S. Strumpf, 2004. "Historical Presidential Betting Markets," Journal of Economic Perspectives, American Economic Association, vol. 18(2), pages 127-141, Spring.
  5. Wolfers, Justin & Zitzewitz, Eric, 2006. "Five Open Questions About Prediction Markets," CEPR Discussion Papers 5562, C.E.P.R. Discussion Papers.
  6. 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.
  7. 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.
  8. 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.
  9. Justin Wolfers & Eric Zitzewitz, 2004. "Prediction Markets," NBER Working Papers 10504, National Bureau of Economic Research, Inc.
  10. Erik Snowberg & Justin Wolfers, 2010. "Explaining the Favorite-Longshot Bias: Is it Risk-Love or Misperceptions?," CESifo Working Paper Series 3029, CESifo Group Munich.
  11. Manski, Charles F., 2006. "Interpreting the predictions of prediction markets," Economics Letters, Elsevier, vol. 91(3), pages 425-429, June.
  12. 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.
  13. Berg, Joyce & Forsythe, Robert & Nelson, Forrest & Rietz, Thomas, 2008. "Results from a Dozen Years of Election Futures Markets Research," Handbook of Experimental Economics Results, Elsevier.
  14. Wolfers Justin & Zitzewitz Eric, 2004. "Experimental Political Betting Markets and the 2004 Election," The Economists' Voice, De Gruyter, vol. 1(2), pages 1-8, October.
  15. 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.
  16. repec:reg:rpubli:82 is not listed on IDEAS
  17. Colin Camerer, 1998. "Can asset markets be manipulated? A field experiment with racetrack betting," Natural Field Experiments 00222, The Field Experiments Website.
  18. repec:reg:rpubli:430 is not listed on IDEAS
  19. 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.
  20. Robin Hanson, 2006. "Designing real terrorism futures," Public Choice, Springer, vol. 128(1), pages 257-274, July.
  21. 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.
  22. Smith, Vernon L, 1985. "Experimental Economics: Reply," American Economic Review, American Economic Association, vol. 75(1), pages 264-72, March.
  23. repec:reg:wpaper:430 is not listed on IDEAS
  24. repec:reg:rpubli:259 is not listed on IDEAS
  25. repec:reg:wpaper:82 is not listed on IDEAS
  26. repec:reg:wpaper:259 is not listed on IDEAS
Full references (including those not matched with items on IDEAS)

Citations

Blog mentions

As found by EconAcademics.org, the blog aggregator for Economics research:
  1. Why did Reddit get the wrong guy? (Or: the Wisdom of Crowds vs. the Madness of Mobs)
    by Noah Smith in Noahpinion on 2013-04-21 20:28:00
Citations are extracted by the CitEc Project, subscribe to its RSS feed for this item.
as in new window

Cited by:
  1. C.J.M. Kool & S. Rosenkranz & M. Middeldorp, 2007. "Listening without understanding: Central Bank transparency, financial markets and the crowding out of private information," Working Papers 07-19, Utrecht School of Economics.

Lists

This item is not listed on Wikipedia, on a reading list or among the top items on IDEAS.

Statistics

Access and download statistics

Corrections

When requesting a correction, please mention this item's handle: RePEc:nbr:nberwo:12083. See general information about how to correct material in RePEc.

For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: ().

If you have authored this item and are not yet registered with RePEc, we encourage you to do it here. This allows to link your profile to this item. It also allows you to accept potential citations to this item that we are uncertain about.

If references are entirely missing, you can add them using this form.

If the full references list an item that is present in RePEc, but the system did not link to it, you can help with this form.

If you know of missing items citing this one, you can help us creating those links by adding the relevant references in the same way as above, for each refering item. If you are a registered author of this item, you may also want to check the "citations" tab in your profile, as there may be some citations waiting for confirmation.

Please note that corrections may take a couple of weeks to filter through the various RePEc services.