Prediction market accuracy in the long run
"Prediction markets" are designed specifically to forecast events such as elections. Though election prediction markets have been being conducted for almost twenty years, to date nearly all of the evidence on efficiency compares election eve forecasts with final pre-election polls and actual outcomes. Here, we present evidence that prediction markets outperform polls for longer horizons. We gather national polls for the 1988 through 2004 U.S. Presidential elections and ask whether either the poll or a contemporaneous Iowa Electronic Markets vote-share market prediction is closer to the eventual outcome for the two-major-party vote split. We compare market predictions to 964 polls over the five Presidential elections since 1988. The market is closer to the eventual outcome 74% of the time. Further, the market significantly outperforms the polls in every election when forecasting more than 100Â days in advance.
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.:
- Forsythe, Robert & Forrest Nelson & George R. Neumann & Jack Wright, 1992. "Anatomy of an Experimental Political Stock Market," American Economic Review, American Economic Association, vol. 82(5), pages 1142-1161, December.
- repec:reg:rpubli:259 is not listed on IDEAS
- repec:sae:ecolab:v:16:y:2006:i:2:p:1-2 is not listed on IDEAS
- Fair, Ray C, 1978.
"The Effect of Economic Events on Votes for President,"
The Review of Economics and Statistics,
MIT Press, vol. 60(2), pages 159-173, May.
- Ray C. Fair, 1976. "The Effects of Economic Events on Votes for President," Cowles Foundation Discussion Papers 418, Cowles Foundation for Research in Economics, Yale University.
- Jones, Randall J. & Armstrong, J. Scott & Cuzan, Alfred G., 2007. "Forecasting elections using expert surveys: an application to U.S. presidential elections," MPRA Paper 5301, University Library of Munich, Germany.
- Forsythe, Robert & Rietz, Thomas A. & Ross, Thomas W., 1999. "Wishes, expectations and actions: a survey on price formation in election stock markets," Journal of Economic Behavior & Organization, Elsevier, vol. 39(1), pages 83-110, May.
- Justin Wolfers & Eric Zitzewitz, 2004. "Prediction Markets," Journal of Economic Perspectives, American Economic Association, vol. 18(2), pages 107-126, Spring.
- Justin Wolfers & Eric Zitzewitz, 2004. "Prediction Markets," NBER Working Papers 10504, National Bureau of Economic Research, Inc.
- Wolfers, Justin & Zitzewitz, Eric, 2004. "Prediction Markets," Research Papers 1854, Stanford University, Graduate School of Business.
- Justin Wolfers & Eric Zitzewitz, 2004. "Prediction Markets," Discussion Papers 03-025, Stanford Institute for Economic Policy Research.
- Gelman, Andrew & King, Gary, 1993. "Why Are American Presidential Election Campaign Polls So Variable When Votes Are So Predictable?," British Journal of Political Science, Cambridge University Press, vol. 23(04), pages 409-451, October.
- M. Ruth & K. Donaghy & P. Kirshen, 2006. "Introduction," Chapters,in: Regional Climate Change and Variability, chapter 1 Edward Elgar Publishing.
- Kenneth Oliven & Thomas A. Rietz, 2004. "Suckers Are Born but Markets Are Made: Individual Rationality, Arbitrage, and Market Efficiency on an Electronic Futures Market," Management Science, INFORMS, vol. 50(3), pages 336-351, March. Full references (including those not matched with items on IDEAS)
When requesting a correction, please mention this item's handle: RePEc:eee:intfor:v:24:y:2008:i:2:p:285-300. 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: (Dana Niculescu)
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.