IDEAS home Printed from https://ideas.repec.org/
MyIDEAS: Log in (now much improved!) to save this article

Internet-Based Virtual Stock Markets for Business Forecasting

  • Martin Spann

    ()

    (School of Business and Economics, Johann Wolfgang Goethe--University Frankfurt am Main, Mertonstrasse 17, 60054 Frankfurt am Main, Germany)

  • Bernd Skiera

    ()

    (School of Business and Economics, Johann Wolfgang Goethe--University Frankfurt am Main, Mertonstrasse 17, 60054 Frankfurt am Main, Germany)

The application of Internet--based virtual stock markets (VSMs) is an additional approach that can be used to predict short-- and medium--term market developments. The basic concept involves bringing a group of participants together via the Internet and allowing them to trade shares of virtual stocks. These stocks represent a bet on the outcome of future market situations, and their value depends on the realization of these market situations. In this process, a VSM elicits and aggregates the assessments of its participants concerning future market developments. The aim of this article is to evaluate the potential use and the different design possibilities as well as the forecast accuracy and performance of VSMs compared to expert predictions for their application to business forecasting. After introducing the basic idea of using VSMs for business forecasting, we discuss the different design possibilities for such VSMs. In three real--world applications, we analyze the feasibility and forecast accuracy of VSMs, compare the performance of VSMs to expert predictions, and propose a new validity test for VSM forecasts. Finally, we draw conclusions and provide suggestions for future research.

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: http://dx.doi.org/10.1287/mnsc.49.10.1310.17314
Download Restriction: no

Article provided by INFORMS in its journal Management Science.

Volume (Year): 49 (2003)
Issue (Month): 10 (October)
Pages: 1310-1326

as
in new window

Handle: RePEc:inm:ormnsc:v:49:y:2003:i:10:p:1310-1326
Contact details of provider: Postal:
7240 Parkway Drive, Suite 300, Hanover, MD 21076 USA

Phone: +1-443-757-3500
Fax: 443-757-3515
Web page: http://www.informs.org/
Email:


More information through EDIRC

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. Roy Batchelor & Pami Dua, 1995. "Forecaster Diversity and the Benefits of Combining Forecasts," Management Science, INFORMS, vol. 41(1), pages 68-75, January.
  2. Edward P. Lazear & Sherwin Rosen, 1979. "Rank-Order Tournaments as Optimum Labor Contracts," NBER Working Papers 0401, National Bureau of Economic Research, Inc.
  3. Jehoshua Eliashberg & Jedid-Jah Jonker & Mohanbir S. Sawhney & Berend Wierenga, 2000. "MOVIEMOD: An Implementable Decision-Support System for Prerelease Market Evaluation of Motion Pictures," Marketing Science, INFORMS, vol. 19(3), pages 226-243, January.
  4. Gjerstad, Steven & Dickhaut, John, 1998. "Price Formation in Double Auctions," Games and Economic Behavior, Elsevier, vol. 22(1), pages 1-29, January.
  5. Rosen, Sherwin, 1986. "Prizes and Incentives in Elimination Tournaments," American Economic Review, American Economic Association, vol. 76(4), pages 701-15, September.
  6. Ananth N. Madhavan, . "Trading Mechanisms in Securities Markets," Rodney L. White Center for Financial Research Working Papers 16-90, Wharton School Rodney L. White Center for Financial Research.
  7. Smith, Vernon L, 1976. "Experimental Economics: Induced Value Theory," American Economic Review, American Economic Association, vol. 66(2), pages 274-79, May.
  8. Alison Hubbard Ashton & Robert H. Ashton, 1985. "Aggregating Subjective Forecasts: Some Empirical Results," Management Science, INFORMS, vol. 31(12), pages 1499-1508, December.
  9. Fama, Eugene F, 1991. " Efficient Capital Markets: II," Journal of Finance, American Finance Association, vol. 46(5), pages 1575-617, December.
  10. Robert C. Blattberg & Stephen J. Hoch, 1990. "Database Models and Managerial Intuition: 50% Model + 50% Manager," Management Science, INFORMS, vol. 36(8), pages 887-899, August.
  11. Smith, Vernon L, 1982. "Microeconomic Systems as an Experimental Science," American Economic Review, American Economic Association, vol. 72(5), pages 923-55, December.
  12. Kahneman, Daniel & Knetsch, Jack L & Thaler, Richard H, 1990. "Experimental Tests of the Endowment Effect and the Coase Theorem," Journal of Political Economy, University of Chicago Press, vol. 98(6), pages 1325-48, December.
  13. 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.
  14. 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.
  15. Daniel Kahneman & Jack L. Knetsch & Richard H. Thaler, 1991. "Anomalies: The Endowment Effect, Loss Aversion, and Status Quo Bias," Journal of Economic Perspectives, American Economic Association, vol. 5(1), pages 193-206, Winter.
  16. Richard H. Thaler & Eric J. Johnson, 1990. "Gambling with the House Money and Trying to Break Even: The Effects of Prior Outcomes on Risky Choice," Management Science, INFORMS, vol. 36(6), pages 643-660, June.
  17. 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.
  18. Harris, Lawrence & Hasbrouck, Joel, 1996. "Market vs. Limit Orders: The SuperDOT Evidence on Order Submission Strategy," Journal of Financial and Quantitative Analysis, Cambridge University Press, vol. 31(02), pages 213-231, June.
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:inm:ormnsc:v:49:y:2003:i:10:p:1310-1326. 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: (Mirko Janc)

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.