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

Prediction markets: an experimental approach to forecasting cattle on feed

  • R. Karina Gallardo
  • B. Wade Brorsen
  • Jayson Lusk

Purpose – The purpose of this paper is to use prediction markets to forecast an agricultural event: United States Department of Agriculture's number of cattle on feed (COF). Prediction markets are increasingly popular forecast tools due to their flexibility and proven accuracy to forecast a diverse array of events. Design/methodology/approach – During spring 2008, a market was constructed comprised of student traders in which they bought and sold contracts whose value was contingent on the number of COF to be reported on April 18, 2008. During a nine-week period, students were presented three types of contracts to forecast the number of COF. To estimate forecasts a uniform price sealed bid auction mechanism was used. Findings – The results showed that prediction markets forecasted 11.5 million head on feed, which was about 1.6 percent lower than the actual number of COF (11.684 million). The prediction market also fared slightly worse than analysts' predictions, which on average suggested there would be about 11.795 million head (an over-estimate of about 1 percent). Originality/value – The contribution of this study was not to provide conclusive evidence on the efficacy of using prediction markets to forecast COF, but rather to present an empirical example that will spark interest among agricultural economists on the promises and pitfalls of a research method that has been relatively underutilized in the agricultural economics literature.

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: Cannot be freely downloaded

As the access to this document is restricted, you may want to look for a different version under "Related research" (further below) or search for a different version of it.

Article provided by Emerald Group Publishing in its journal Agricultural Finance Review.

Volume (Year): 70 (2010)
Issue (Month): 3 (November)
Pages: 414-426

in new window

Handle: RePEc:eme:afrpps:v:70:y:2010:i:3:p:414-426
Contact details of provider: Web page:

Order Information: Postal: Emerald Group Publishing, Howard House, Wagon Lane, Bingley, BD16 1WA, UK
Web: Email:

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. Fama, Eugene F, 1970. "Efficient Capital Markets: A Review of Theory and Empirical Work," Journal of Finance, American Finance Association, vol. 25(2), pages 383-417, May.
  2. Kahneman, Daniel & Tversky, Amos, 1979. "Prospect Theory: An Analysis of Decision under Risk," Econometrica, Econometric Society, vol. 47(2), pages 263-91, March.
  3. Justin Wolfers & Eric Zitzewitz, 2006. "Five Open Questions About Prediction Markets," NBER Working Papers 12060, National Bureau of Economic Research, Inc.
  4. Frank, Julieta & Garcia, Philip & Irwin, Scott H., 2007. "To What Surprises Do Hog Futures Markets Respond?," 2007 Conference, April 16-17, 2007, Chicago, Illinois 37573, NCCC-134 Conference on Applied Commodity Price Analysis, Forecasting, and Market Risk Management.
  5. 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 1142-61, December.
  6. Isengildina, Olga & Irwin, Scott H. & Good, Darrel L., 2005. "The Value of USDA Situation and Outlook Information in Hog and Cattle Markets," 2005 Conference, April 18-19, 2005, St. Louis, Missouri 19050, NCR-134 Conference on Applied Commodity Price Analysis, Forecasting, and Market Risk Management.
  7. Dhuyvetter, Kevin C. & Schroeder, Ted C. & Parcell, Joseph L., 1997. "The Effect of USDA Cattle on Feed Reports on Feeder Cattle Futures Prices," 1997 Annual Meeting, July 13-16, 1997, Reno\Sparks, Nevada 35751, Western Agricultural Economics Association.
  8. repec:reg:rpubli:259 is not listed on IDEAS
  9. 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.
  10. Robert J. Shiller, 1998. "Human Behavior and the Efficiency of the Financial System," NBER Working Papers 6375, National Bureau of Economic Research, Inc.
  11. John M. Marsh, 2003. "Impacts of Declining U.S. Retail Beef Demand on Farm-Level Beef Prices and Production," American Journal of Agricultural Economics, Agricultural and Applied Economics Association, vol. 85(4), pages 902-913.
Full references (including those not matched with items on IDEAS)

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:eme:afrpps:v:70:y:2010:i:3:p:414-426. 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: (Louise Lister)

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.