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Long-Term Forecasting with Prediction Markets - A Field Experiment on Applicability and Expert Confidence


  • Andreas Graefe
  • Christof Weinhardt


While prediction markets have become increasingly popular to forecast the near-term future, the literature provides little evidence on how they perform for long-term problems. For assessing the long-term, decision-makers traditionally rely on experts, although empirical research disputes the value of expert advice. Reporting on findings from a field experiment in which we implemented two prediction markets in parallel to a Delphi study, this paper addresses two questions. First, we analyze the applicability of prediction markets for long-term problems whose outcome cannot be judged for a long time. Second, by comparing trading behavior of an expert and a student market, we analyze whether there is evidence that supports the assumption that experts possess superior knowledge. Our results show that prediction markets provide similar results as the well-established Delphi method. We conclude that prediction markets appear to be applicable for long-term forecasting. Furthermore, we observe differences in the confidence of experts and non-experts. Our findings indicate that, in contrast to students, experts reveal their information well-considered based on what they think they know. Finally, we discuss how such analyses of market participants' confidence provide valuable information to decision-makers and may be used to improve on traditional forecasting methods.

Suggested Citation

  • Andreas Graefe & Christof Weinhardt, 2008. "Long-Term Forecasting with Prediction Markets - A Field Experiment on Applicability and Expert Confidence," Journal of Prediction Markets, University of Buckingham Press, vol. 2(2), pages 71-91, September.
  • Handle: RePEc:buc:jpredm:v:2:y:2008:i:2:p:71-91

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    Cited by:

    1. Patrick Buckley & Fergal O’Brien, 0. "The effect of malicious manipulations on prediction market accuracy," Information Systems Frontiers, Springer, vol. 0, pages 1-13.
    2. Buckley, Patrick, 2016. "Harnessing the wisdom of crowds: Decision spaces for prediction markets," Business Horizons, Elsevier, vol. 59(1), pages 85-94.
    3. repec:spr:infosf:v:19:y:2017:i:3:d:10.1007_s10796-015-9617-7 is not listed on IDEAS

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