IDEAS home Printed from https://ideas.repec.org/a/buc/jpredm/v5y2011i3p27-41.html
   My bibliography  Save this article

Interpreting Political Prediction Market Prices As Probabilities: A Study Of A 2008 U.S. Presidential Election Market

Author

Listed:
  • John F Kros
  • Enping Mai
  • Christopher M Keller

Abstract

Daily trading in INTRADE’s 2008 U.S. Presidential electoral markets is analyzed in this paper. INTRADE provides a unique bridge connecting the political voting literature and the price probabilities in the growing prediction market research. Since these markets involve only fixed return options, it is plausible, assuming risk-neutrality, to interpret the ratio of an option’s price to the option’s fixed return as representing the probability of the option being “in the money”. Observed price-probability differences are contraindicated by the theory of risk-neutral market efficiency. Several authors have theorized variously generalized rubrics of non-risk-neutral utility preferences that purport to explain these price-probability differences. This paper demonstrates, using historical vote participation estimates, that observed price-probability differences can be explained as a function of the variability of voter turnout in a political prediction market.

Suggested Citation

  • John F Kros & Enping Mai & Christopher M Keller, 2011. "Interpreting Political Prediction Market Prices As Probabilities: A Study Of A 2008 U.S. Presidential Election Market," Journal of Prediction Markets, University of Buckingham Press, vol. 5(3), pages 27-41.
    • Handle: RePEc:buc:jpredm:v:5:y:2011:i:3:p:27-41
    as

    Download full text from publisher

    File URL: http://ubplj.org/index.php/jpm/article/view/491
    Download Restriction: no
    ---><---

    More about this item

    JEL classification:

    • L83 - Industrial Organization - - Industry Studies: Services - - - Sports; Gambling; Restaurants; Recreation; Tourism

    Statistics

    Access and download statistics

    Corrections

    All material on this site has been provided by the respective publishers and authors. You can help correct errors and omissions. When requesting a correction, please mention this item's handle: RePEc:buc:jpredm:v:5:y:2011:i:3:p:27-41. See general information about how to correct material in RePEc.

    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.

    We have no bibliographic references for this item. You can help adding them by using 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 RePEc Author Service profile, as there may be some citations waiting for confirmation.

    For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: Dominic Cortis, University of Malta (email available below). General contact details of provider: http://www.ubpl.co.uk/ .

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

    IDEAS is a RePEc service. RePEc uses bibliographic data supplied by the respective publishers.