IDEAS home Printed from
MyIDEAS: Login to save this article or follow this journal

Price Biases in a Prediction Market: NFL Contracts on Tradesports

  • Richard Borghesi
Registered author(s):

    We examine deviations between the prices and values of binary options listed on, an online prediction market. Our analysis shows that NFL sides contracts are overpriced on average, indicating that this market may be characterized by a shortage of sellers. We also find that overpricing is more pronounced immediately after information shocks occur, especially when the news is negative. Additionally, while prior research suggests that differences between asset prices and values should be symmetric around the market-price-midpoint of $50, we find that this divergence is instead larger for low-priced contracts. Finally, we demonstrate that a simple rule designed to exploit the identified biases enables a highly profitable trading strategy.

    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:
    Download Restriction: no

    Article provided by University of Buckingham Press in its journal Journal of Prediction Markets.

    Volume (Year): 1 (2007)
    Issue (Month): 3 (December)
    Pages: 233-253

    in new window

    Handle: RePEc:buc:jpredm:v:1:y:2007:i:3:p:233-253
    Contact details of provider: Web page:

    Order Information: Web: Email:

    No references listed on IDEAS
    You can help add them by filling out this form.

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

    When requesting a correction, please mention this item's handle: RePEc:buc:jpredm:v:1:y:2007:i:3:p:233-253. 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: (Victor Matheson, College of the Holy Cross)

    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.

    This information is provided to you by IDEAS at the Research Division of the Federal Reserve Bank of St. Louis using RePEc data.